ATM machines treated as computers for depreciation under income-tax law on functional test and data-processing use.

ATM machines are treated as computers for depreciation under income-tax law where their essential function is data processing and computer-driven transaction handling. The functional test, rather than commercial-parlance or a non-income-tax classification, governs the depreciation rate. Earlier coordinate bench decisions in the assessee's own case had consistently accepted ATM machines as computer-integrated equipment, and that approach was followed here. A contrary sales tax ruling was held inapposite. On that basis, higher depreciation was allowed.

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Issues: Whether ATM machines are entitled to higher depreciation by being treated as computers for the purpose of depreciation under the income-tax regime.

Analysis: The claim for higher depreciation was examined in the light of the functional attributes of ATM machines and the view already taken in the assessee's own earlier years. The determining consideration was whether the ATM performs the logical, processing and output functions associated with a computer in banking operations. The earlier coordinate bench decisions, consistently followed in the assessee's case, had accepted that ATM machines are computer-integrated equipment and therefore eligible for the higher rate of depreciation. The contrary reliance on a sales tax decision was held not to govern the interpretation under income-tax law, where the functional test was applied rather than a strict commercial-parlance approach.

Conclusion: ATM machines are eligible for higher depreciation as computers, and the assessee's claim was allowed.

Ratio Decidendi: For depreciation purposes under income-tax law, an ATM is to be treated as a computer where its essential function is data processing and computer-driven transaction handling, applying the functional test rather than a non-income-tax classification of the equipment.

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