2010 (8) TMI 58 - HC - Income Tax

Computer accessories and peripherals are integral to computer systems and qualify for higher depreciation at 60%

HC held that computer accessories and peripherals, including printers, scanners and servers, are integral parts of the computer system and cannot be used ... Depreciation - integral part of the computer system - allowability of higher rate of depreciation for computer assets - treatment of computer peripherals and accessories as computerDepreciation - integral part of the computer system - allowability of higher rate of depreciation for computer assets - treatment of computer peripherals and accessories as computer - Computer accessories and peripherals (printers, scanners, servers, etc.) are eligible for depreciation at the higher rate of 60% as part of the computer system. - HELD THAT: - The Tribunal and the Commissioner (Appeals) had allowed depreciation at the higher rate on computer peripherals and accessories, following coordinate-bench decisions which treated printers, scanners, servers and similar peripherals as integral parts of the computer system and therefore eligible for 60% depreciation. The High Court agreed with those conclusions, observing that such accessories and peripherals cannot be used independently of the computer and, being part of the computer system, are entitled to depreciation at the higher rate. The Court therefore upheld the findings of the lower authorities and rejected the revenue's contention that peripherals should attract the normal lower rate. [Paras 4, 5]Appeal dismissed; depreciation at 60% on computer peripherals and accessories upheld.Final Conclusion: The High Court dismissed the Revenue's appeal under Section 260A, affirming that computer peripherals and accessories which form an integral part of the computer system are entitled to depreciation at the higher rate of 60% for Assessment Year 2004-2005. Issues:Appeal challenging higher rate of depreciation on computer accessories and peripherals.Analysis:The appeal was filed under Section 260A of the Income Tax Act, 1961, contesting the order of the Income Tax Appellate Tribunal allowing depreciation at 60% on computer accessories and peripherals instead of the normal rate of 25%. The Revenue argued that these accessories should not be treated at par with computers and software. However, both the Commissioner of Income Tax (Appeals) and the Tribunal had already allowed the higher rate of depreciation. The Tribunal cited precedents where it was established that peripherals like printers, scanners, and servers are integral parts of the computer system and eligible for the higher depreciation rate. The Tribunal upheld the decision of the CIT(A) in allowing 60% depreciation on computer peripherals and accessories, ultimately dismissing the appeal by the Revenue.The Court concurred with the Tribunal's view that computer accessories and peripherals, including printers, scanners, and servers, are integral to the computer system and cannot function independently. As these components are essential parts of the computer system, they are deemed eligible for depreciation at the higher rate of 60%. Consequently, the Court dismissed the appeal at the threshold, affirming the decision of the Tribunal.