TaxTMI 
TaxTMI 
2013 (10) TMI 1376
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....ness of publishing newspapers, satellite television broadcasting apart from manufacture and trading of food products and hiring of shooting sets. For the impugned assessment year, the assessee filed its return of income on 30- 10-2002 declaring loss of Rs. 35,11,65,028/-. The Assessing Officer completed the assessment u/s 143(3) of the Act vide order dated 22-10-2005 by determining the loss at Rs. 34,86,50,028/-. Subsequently, the Assessing Officer having reason to believe that there was escapement of income on account of excess claim of depreciation in respect of the block of asset of computer, reopened the assessment by issuing a notice u/s 148 on 14-10-2006. In response to the said notice the assessee filed a return on 8-11-2006 admitting the loss determined by the Assessing Officer in the assessment order passed u/s 143(3) of the Act at Rs. 34,86,50,028/-. During the reassessment proceedings, the Assessing Officer after examining the details of additions made to computer and other accessories submitted by the assessee called upon the assessee to explain why depreciation claimed in respect of the block of computers at the rate of 60% shall not be disallowed. The assessee in its ....
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....e versions, depreciation on the software is allowable at 25% only which is applicable for the block "plant and machinery". The Assessing Officer accordingly completed the assessment by disallowing the excess depreciation of 35% claimed by the assessee amounting to Rs. 11,95,58,702/- and completed the assessment accordingly. The assessee being aggrieved of the disallowance preferred an appeal before the CIT (A). 6. In course of hearing of the appeal before the CIT (A), the assessee reiterating the stand taken before the Assessing Officer submitted that as per definition of computer as given below Explanation under clause (ix) to sub-section (1) of section 36 of the Act, it is the collection of devices which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to logic, arithmetic, data storage and retrieval, communication and control. It was submitted that various equipments referred to by the Assessing Officer cannot be used with any other equipment except in conjunction with computers. It was submitted that these items cannot be used for any other purpose excepting with the computers and hence they co....
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.... requires computer systems and the data transmission apparatus of complex nature. It was submitted that the assessee also runs television channels which operates on 24x7 base. These also require computer system, several types of software has also editing and broadcasting systems which run in conjunction with highly sophisticated computerised audio and video systems. Hence these items/equipments have to be considered as integral part of the computer system making it eligible for availing deprecation at the rate of 60% as is allowable in the case of computer. 9. The learned authorised representative for the assessee submitted that for the assessment year 2006-07, the Incometax Appellate Tribunal while considering an identical issue in assessee's own case has held the order of the CIT (A) for allowing depreciation at the rate of 60% in respect of computers and accessories such as key board, mouse, UPS, net working etc. 10. The learned Departmental Representative, on the other hand, strongly relying upon the orders of the Assessing Officer and CIT (A) submitted that the appendix to the income-tax rules only mentions computer and not accessories. Hence, disallowance of excess deprecia....
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....edominant function, usage and common parlance understanding, would have to be taken into account. To analyse further, let us take the case of a Television, the principal task of which is to deliver visuals accompanied with audio. The signals, are received through the relevant net works such as Dish TV, Tata Sky etc. But TV does not become computer for the reason that its principal function cannot be done only with the aid of 'computer functions' notwithstanding the fact that in the entire process of networking or receiving the output from different channels and making it available to the viewers, some sort of computer functions are necessarily involved. Similarly take the case of mobile phone. Its principal task is to receive and send calls. It is not a standalone apparatus which can operate without the relevant network, such as Airtel, BSNL, Reliance. It, therefore, follows that any machine or equipment cannot be described as computer, if its principal output or function is the result of some sort of 'computer functions' in conjunction with some non-computer functions. In order to be called as computer, it is sine qua non that the principal output/ object/f unction....
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....sical interfaces of the router. The term "layer 3 switching" is used often interchangeably with the term "routing". The term switching is generally used to refer to data forwarding between two network devices that share a common network address. 29. In simple words, a router means a device that routes data from one computer to another or from one network to another. Routers provide connectivity inside enterprises, between enterprises and the internet, and inside Internet providers. From the above discussion it transpires that the function of a router is to receive the data from one computer and make it available to another computer for viewing or further processing. Apart: from facilitating the flow of data between two computers, the routers also. help in the transfer of data from network to computer. Thus the essential function of the router in a commercial organization is to facilitate the flow of data from one computer to another for its processing or storage. Switches are shorter version of routers, which perform similar functions as that of routers but within a limited sphere. 30. On functioning of a 'Router' we find that there is no dispute on the fact that a "R....
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....s, it is seen that these can also be used with a Television and in such use, E0 computer is required. These are also called T.V. routers. Similarly, "Internet Service Providers", give connectivity, by installing a router in the premises of the persons !institutions availing the internet connection. In these cases the router is not used along with a computer. In such a situation, it would be a "Stand alone" equipment. In such cases this cannot be considered a component of a computer or computer Hardware. Giving another example, a computer software can be used in many devices including washing machine, televisions, telephone equipment etc. When such software is used in those devices, it integrates with that particular devices. The predominant function of the device determines its classification. Only if the Computer software, resides in a computer, then it become a part and parcel of a computer and, as long as it is as integral part of a computer, it is classified as a 'Computer'. 31.4. In view of the above discussion, we are of the considered view that router and switches can be classified as a computer Hardware when they are used along with a computer and when their func....
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....g with computer and when their functions are integrated with the computer comes within the ambit of the expression 'computer'. We may further observe that in the assessee's own case for the assessment year 2006-07, Income-tax Appellate Tribunal, Hyderabad Bench while deciding the departmental appeal in ITA Nos. 701/Hyd/2009 and 426/Hyd/10 dated 9-7- 2012 also upheld the order passed by the CIT (A) in allowing depreciation at the rate of 60% by treating the screen, key board, mouse, UPS, net working, router as part of the computer system and thereby eligible for depreciation at the rate of 60% as available to computer. In the aforesaid view of the matter, we are inclined to accept the assessee's contention that it is entitled to avail depreciation at the rate of 60% on those items as is applicable to 'computer'. Accordingly, we set aside the order passed by the CIT (A) by allowing the grounds raised by the assessee. 13. In the result, the appeal of the assessee is allowed. ITA No.591/Hyd/2010- Asst. Year: 2003-04:- 14. The only issue in the aforesaid appeal is with regard to the disallowance of depreciation amounting to Rs. 2,30,96,110/- made by the Assessing Officer and confirm....