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Issues: (i) whether computer peripherals and accessories such as printers, scanners, modems and routers were eligible for depreciation at the higher rate applicable to computers; (ii) whether the cost of production of TV serials and programmes was allowable as revenue expenditure; (iii) whether the film software library was an intangible asset eligible for depreciation at 25%; and (iv) whether depreciation was allowable on the non-compete payment treated as an intangible asset.
Issue (i): whether computer peripherals and accessories such as printers, scanners, modems and routers were eligible for depreciation at the higher rate applicable to computers.
Analysis: The classification depended on the functional role of the devices in the computer system. Peripherals and input-output devices used integrally with computers were treated as part of the computer block, and the consistent view taken in the assessee's own earlier years was also relied upon.
Conclusion: The higher rate of depreciation on computer peripherals was upheld in favour of the assessee.
Issue (ii): whether the cost of production of TV serials and programmes was allowable as revenue expenditure.
Analysis: The content produced for telecasting was held to be part of the business trading activity and not a capital asset merely because repeat telecast value or later exploitation might exist. Rule 9A and Rule 9B were not treated as controlling for TV programming, and the matter was governed by the settled view in the assessee's own case and other persuasive authorities that such expenditure is deductible in the year incurred.
Conclusion: The expenditure on production of TV serials and programmes was held to be revenue in nature and allowable to the assessee.
Issue (iii): whether the film software library was an intangible asset eligible for depreciation at 25%.
Analysis: The library was treated as a business or commercial right of similar nature and not as plant and machinery. In the absence of any change in facts or contrary material, the consistent treatment adopted in earlier years and in connected cases was followed.
Conclusion: Depreciation at 25% on the film software library was upheld in favour of the assessee.
Issue (iv): whether depreciation was allowable on the non-compete payment treated as an intangible asset.
Analysis: The non-compete arrangement was linked to the business restructuring and the valuation of the asset had already been accepted in the group's proceedings. The objection that the covenant was purely personal and had no independent value was not accepted in view of the factual matrix and the earlier accepted treatment of the same asset in the demerged entity's case.
Conclusion: Depreciation on the non-compete payment was allowed in favour of the assessee.
Final Conclusion: The Revenue's appeal failed on all substantive grounds, and the additions and depreciation restrictions made by the Assessing Officer were not restored.
Ratio Decidendi: Where an item is functionally integral to the assessee's business asset base, or where a business right has already been consistently recognised in earlier years and connected proceedings, the same treatment should ordinarily continue absent a material change in facts or law.
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