Court rules no extra-shift allowance on computer depreciation under Income-tax Act

The High Court of BOMBAY ruled that extra-shift allowance of depreciation is not permissible on a data processing computer system for the assessment year of 1980-81. The court relied on legal provisions under section 32 of the Income-tax Act and rule 5 of the Income-tax Rules, 1962, which specify depreciation rates for different asset categories. As computers are excepted from extra-shift allowance under the 'N.E.S.A.' classification, the court denied the claim, aligning with a previous decision. The Revenue's position was upheld, and the assessee's claim was rejected, with no costs awarded.

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Issues:
1. Whether extra-shift allowance of depreciation is allowable on a data processing computer systemRs.

Analysis:
The High Court of BOMBAY was tasked with deciding whether an extra-shift allowance of depreciation is permissible on a data processing computer system for the relevant assessment year of 1980-81. The Income-tax Officer initially disallowed the claim for extra-shift allowance, allowing only normal depreciation at a rate of 20%. However, the Commissioner of Income-tax (Appeals) overturned this decision, relying on a previous Tribunal order in favor of the assessee. Subsequently, the Income-tax Appellate Tribunal upheld the allowance of extra-shift depreciation based on their earlier decision, leading to the reference to the High Court.

Upon reviewing the relevant legal provisions, the court referred to section 32 of the Income-tax Act and rule 5 of the Income-tax Rules, 1962, which specify rates of depreciation for different categories of assets. Notably, computers are classified under Category III with specific rates of depreciation. The court highlighted that the provision for extra-shift depreciation allowance has limitations, stating that no extra-shift allowance is permitted for assets specifically excepted by the inscription 'N.E.S.A.' Against it in the classification. As computers fall under this exception in the entry for data processing machines, the court concluded that extra-shift allowance cannot be granted for computers.

In light of the clear legal provisions and the precedent set by a previous decision of the court, both parties agreed that the present case aligns with the earlier ruling. Consequently, the court answered the referred question in the negative, favoring the Revenue and denying the assessee's claim for extra-shift allowance on the data processing computer system. The reference was disposed of accordingly with no order as to costs.

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