UPS can be considered as Computer If it is Connected to ATM Machine or a Computer: ITAT allows 60% Depreciation [Read Order]


The Hyderabad bench of Income Tax Appellate Tribunal (ITAT) recently held that UPS can be considered as a computer if it is connected to the ATM machine or a computer and accordingly allowed depreciation at the rate of 60%.

The assessee in the instant case is a cooperative society engaged in banking business filed its return of income for the relevant assessment year and declared its total income at Rs. 3,97,50,110.

During the course of assessment proceedings under Section 143(3) of the Income Tax Act, 1961 the Assessing Officer (AO) noticed that the Assessee has claimed depreciation at the rate of 60% on UPC which was connected to its ATM machine.

Whereas according to the AO, the depreciation allowable on the item is only 15%. He submitted that according to the Information Technology Act 2000 the UPS is just an instrument to ensure uninterrupted power supply and to regulate the flow of power to computer system, therefore, cannot be considered as part of the computer and accordingly he allowed 15% depreciation and disallowed the remaining 45% of the claim and the same was brought into tax.

On appeal, CIT(A) upheld the order of the AO and confirmed the addition made by him. However, the Assessee preferred the further appeal before the Tribunal.

Counsel for the Assessee Advocate C.V.Narasimham submitted before the bench that the UPS is necessary for the running of the ATM and ATM-related accessories and therefore, they should be considered as part of the computer and depreciation should be allowed at 60%.

After analyzing the facts and circumstances deeply, the Tribunal bench comprising of Judicial Member P. Madhavi Devi and Accountant member S.Rifaur Rahman objected the findings of lower authorities and held that Assessee in the present case is eligible for depreciation at the rate of 60%.

The division bench further observed that “though the UPS can independently function without the assistance or integration with a computer and is an alternate mode of supply of power and does not depend on any assistance from a computer, the computer can function only on a power supply and when there is no power supply, it is connected to UPS so that it can work uninterruptedly and without losing the unsaved data when the power goes off. Therefore UPS also can be considered as a computer if it is connected to the ATM Machine or a Computer and depreciation thereon are allowable at 60%”.

While concluding the issue the bench directed the AO to verify if the UPS are used for the functioning of the ATM and allow depreciation accordingly.

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