Depreciation on video conferencing equipment allowed at computer rate, but TV sets were excluded as independent units.

Video conferencing equipment was examined for eligibility to 60% depreciation as computer equipment under the Income-tax Rules. The tribunal accepted that items functionally connected to the computer system could qualify where they operate as integral peripherals, but it distinguished television sets used in the system because they were capable of independent operation and did not form an inseparable part of the computer system. Depreciation at the higher rate was therefore allowed for the video conferencing items other than TV sets, while the claim was rejected for TV sets.

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Issues: Whether video conferencing equipment was entitled to depreciation at 60% as computer equipment, and whether TV sets forming part of such equipment could also be treated as part of the computer system for the same rate of depreciation.

Analysis: The rate of depreciation under the relevant Income-tax Rules was applicable to computers and computer software. The functional connection of some items in a video conferencing system with the computer was accepted, but the tribunal distinguished TV sets from peripherals such as printer, scanner and server, which cannot function without the computer and form an integral part of the computer system. TV sets used in video conferencing were found capable of independent operation and were not treated as an integral part of the computer system.

Conclusion: Depreciation at 60% was allowed for the video conferencing items other than TV sets, but the claim at the higher rate was rejected for TV sets; the Revenue succeeded to that extent and the assessee succeeded for the balance.

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