Computer depreciation treatment: routers and switches held to be integral parts of the computer for higher depreciation.

Routers and switches used in a network setup were treated as integral parts of a computer for depreciation purposes under section 32. The article explains that the relevant depreciation rates are governed by the prescribed rules, that the special definition of "computer system" in section 36(1)(xi) does not apply to section 32, and that the Information Technology Act definition is only a guide. Applying common and commercial parlance, the devices were examined by function and character; because they support data transmission within the computer system, they can form part of the computer. On the facts, the devices qualified for depreciation at 60% in favour of the assessee.

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Issues: Whether routers and switches used in the assessee's network setup constituted part of a computer so as to qualify for depreciation at 60% under the income-tax depreciation schedule.

Analysis: Depreciation under section 32 is governed by the prescribed rates in the rules and appendix. The term "computer" was not defined in the Act for the relevant provision, and the special definition of "computer system" in section 36(1)(xi) was held to be confined to that clause and not transferable to section 32. The definition in the Information Technology Act, 2000 was also not treated as controlling for income-tax purposes, though it was considered as a guide. Applying common parlance and commercial parlance principles, the function, use, and character of routers and switches were examined. Since they facilitate transmission and routing of data and do not themselves perform the logical, arithmetic, and memory functions of a computer, they are not automatically outside the concept of computer equipment; where such devices operate as integral components of the computer system, they form part of the computer.

Conclusion: Routers and switches, on the facts of the case, were held to be integral parts of the computer and were eligible for depreciation at 60%, in favour of the assessee.

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