Depreciation on routers and switches follows their integral computer function, allowing the higher computer-block rate.

Routers and switches used in conjunction with computers are treated as part of the computer block for depreciation where their predominant function is to facilitate data flow and they operate as integral hardware within the computer setup. The applicable depreciation rate under section 32 depends on the character of the asset in the Rules and Appendix I, and the decisive test is whether the device has independent commercial utility or is merely ancillary to the computer's operation. On that basis, such equipment qualifies for depreciation at 60% rather than as general plant and machinery at 25%.

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Issues: Whether routers and switches, when used with computers for networking and data transmission, are to be treated as part of "computers" eligible for depreciation at 60% or as general plant and machinery eligible only at 25%.

Analysis: The rate of depreciation under section 32 depends on the character of the asset as prescribed in the Rules and Appendix I. The expression "computer" is not defined for the purpose of depreciation, so its meaning had to be gathered from common parlance and the statutory scheme. The definition of "computer system" in section 36(1)(xi) was held inapplicable because it was enacted for a different purpose and a limited period. The definition in the Information Technology Act, 2000 was also not treated as directly importable, though it was considered as a useful aid. The deciding consideration was the predominant function of the device and whether it operated as an integral part of the computer. Routers and switches were found to facilitate the flow of data between computers and networks and, when used as part of the computer setup, they functioned as computer hardware rather than as independent equipment.

Conclusion: Routers and switches used in conjunction with computers are to be included in the block of "computer" and are entitled to depreciation at 60%.

Ratio Decidendi: Where a device has no independent commercial utility apart from its use as an integral component of a computer system, and its function is ancillary to the computer's operation, it is to be classified as part of the computer for depreciation purposes.

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