Revenue appeal on computer peripherals' depreciation & holding company assets dismissed for AY 2005-06.

The appeal by the revenue challenging the disallowance of extra depreciation on computer peripherals/accessories and depreciation on assets with the holding company for Assessment Year 2005-06 was dismissed. The ITAT upheld the CIT (A)'s decision, citing legal precedents that computer peripherals are eligible for higher depreciation and that assets with the holding company are considered under the block of assets concept. The appeal was dismissed in its entirety, affirming the eligibility of computer peripherals for higher depreciation and the treatment of assets with the holding company under relevant legal precedents.

---

---

Issues:
1. Disallowance of extra depreciation on computer peripherals/accessories.
2. Disallowance of depreciation on assets with the holding company.

Issue 1 - Disallowance of extra depreciation on computer peripherals/accessories:
The appeal by the revenue challenged the deletion of an addition on account of disallowance of extra depreciation on computer peripherals/accessories for Assessment Year 2005-06. The CIT (A) admitted the claim of the assessee that accessories like Network, RAM, Surf Controller, etc., are integral parts of the computer system and thus eligible for higher depreciation at 60%. The ITAT, after considering the arguments, upheld the decision of the CIT (A) citing a judgment by the Hon'ble Delhi High Court, which stated that computer accessories and peripherals are integral parts of the computer system and entitled to higher depreciation. Therefore, Ground No.1 of the appeal was dismissed.

Issue 2 - Disallowance of depreciation on assets with the holding company:
Regarding Ground No.2, the Assessing Officer disallowed depreciation claimed on assets amounting to Rs. 8,16,858/- lying with the ultimate holding company, as they were not used for the assessee's business. The CIT (A) allowed the claim, stating that once an asset merges into a block of assets, individual asset identity is lost, and the use of the block asset is the relevant factor. The ITAT referred to a decision by the Hon'ble Delhi High Court, which held that even if the business is closed, depreciation cannot be disallowed for non-user. Therefore, the ITAT dismissed Ground No.2 of the revenue's appeal. Consequently, the appeal filed by the revenue was dismissed in its entirety.

In conclusion, the ITAT upheld the decisions of the CIT (A) on both issues, emphasizing the eligibility of computer peripherals/accessories for higher depreciation and the treatment of assets with the holding company under the block of assets concept as per relevant legal precedents.

---