TaxTMI 
TaxTMI 
2021 (9) TMI 839
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....tak Mahindra Private Limited. The said party was not cooperating in providing form 26A to the assessee. 3. The Learned Commissioner of Income tax (Appeals) has erred in upholding disallowance out of foreign travelling expenses to the extent of 5% of the expense (excluding cost of air tickets and visa fee) on account of personal nature of expenditure. Being the case of a company no disallowance for personal expenses was called for." 2. Grounds of appeal in ITA No. 316/Asr/2017 "1. The Learned Commissioner of Income Tax (Appeals), has erred in upholding the action of the Assessing Officer in restricting the deprecation on apple Ipad at general rate of 15%. Depreciation on apple Ipad was rightly claimed by treating it as computer. 2. The Learned Commissioner of Income Tax (Appeals) has erred in upholding disallowance out of foreign travelling expenses to the extent of 5% of the expense (excluding cost of air tickets and visa fee) amounting to Rs. 295,795/- on account of personal nature of expenditure. Being the case of a company no disallowance for personal expenses was called for." 1. At the outset the Ld. AR for the assessee had submitted, that the a....
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....on of electronic impulses and thus qualifies as being a computer. The bare function of composing and sending an email and receiving a reply will qualify ipad as a computer though the apple ipad performs many more functions of a computer such as word processing, preparing excel sheet, power point presentation, accessing internet etc. Most of these features listed under the head "FEATURES" in the technical specifications of ipad filed at page no. 7. The term computer should not be confused with a desktop computer. Over a period of time, the size of the computers has shrunk. Initially computers being huge were a part of the table itself, after passage of time desktops evolved the next generation was laptops and then came tablets/palmtops which are even smaller than laptops. Desktop, laptop as well as tablet devices have to be treated as computer as they perform basically the same functions. Even if a tablet computer has a feature to make telephone/data calls, it cannot be treated as a phone just as a desktop/laptop has the facility to make a data call through skype and various similar software applications cannot be treated as a phone. The assessing officer was thus not justified in t....
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.... Ipad does not have a CD Drive and therefore CD's cannot be run on the ipad nor they can be used to transfer data or documents. iii) Ipad is not compatible with Windows which is the single most popular operating system used by business all over the world and documents like word, excel sheets, power point presentations which are used and exchanged between business are on the windows platform and these cannot be used there is no question of considering ipad as a computer. 7. With regard to the observations of ld. CIT(A) we are to submit that: i) Availability of USB port is not necessary for describing a device as a computer. Computers existed even before USB port. It is only a means of transferring data which can be done through wired (charging port of ipad) as well as wireless communication such as wifi, 2G/3G/4G, Bluetooth etc. What is pertinent to mention is that an apple ipad as USB port which is used for transfer of data as well as charging of ipad. This is clear from the specification of ipad as mentioned under the head "COMMS" of the specification sheet filed at page no. 43. ii) Availability of CD drive port is not necessary for describi....
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....ssets were filed. The assessee besides having purchased apple ipad had also purchased an apple iphone during the year under consideration. Copy of the purchase bill of ipad has already been filed at page no. 6 of the paper book. Copy of the purchase bills of iphone which was filed with the assessing officer at page no. 287 of the reply dated 28/1/2015 is enclosed at page no. 38. A comparison of these purchase bills will show that IMEI (International Mobile Equipment Identity) number has been mentioned in the purchase invoice for iphone and not in the invoice for the purchase of ipad. The apple ipad thus did not have any IMEI number. 10. Detailed specification regarding the apple ipad in question could not be found from the website of apple inc. as the model being discussed has been discontinued. As suggested by the local apple store, we have downloaded specification of apple ipad pro which is a recent model and even this product has two models, one with cellular ability and one without cellular ability. Copy of the detailed specifications with the website from where it was downloaded enclosed at page no. 39 to 42 [please see page no. 40]. The bill issued by the supplier fo....
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.... are having the common feature of processing the information and are in broader terms, are "computer" in nature. She had further submitted that the pre-dominant purpose is required to be determined for the purpose of classification the iPad/mobile. If the predominant usage of the iPad is computer, then the necessary higher depreciation is allowable however if the purposes using the iPad as a mobile instrument, then lower rate of the depreciation is allowable. She had submitted that the ipad usage is mobile in nature and is not a substitute of computer hence the ground raised by the assessee is required to be dismissed. 4. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. Under the income tax act there is no definition of computer. However the computers are considered to be part of the "plant" under broader definition of tangible things in section 32 of the income tax act. 5. Admittedly an assessee is entitled to depreciation on building, machinery plant or furniture if it is wholly or partly owned by the assessee and is used by the assessee....
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....arison to phones, however this distinction of size of screen is also no more available, as many foldable mobile phones are available in the market. 5.5. Having noticed that the iPad and smart phones are akin to computers within the meaning of computers, as per the Information Technology Act now we have to find out whether the definition of computer given under the information technology Act can be utilised for the purpose of providing the depreciation to the computers under the income tax act or not. We may usefully utilized the finding recorded by the special Bench while adjudicating the disputes pertaining to routers in the matter of ITA. Nos. 7462 & 754/Mum/2007 DCIT VS Datacraft India Ltd. wherein it was held as under:- "17. Having seen the object of the Information Technology Act, 2000, the question which arises for consideration is that can we import the definition of 'computer', as given in it, in the Income Tax Act, 1961 for the purposes of section 32? It has been held by the Hon'ble Supreme Court in CIT vs. Venkateswara Hatcheries (1999) 237 ITR 174 (SC) that the meaning assigned to a particular word in a particular statute cannot be imported to a w....
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....analysing the intendment of providing for higher rate of depreciation. We may refer to several case law to analyse as to which formula would aptly suit the situation in the given case. 1. In Indian Hotels Co. Ltd. & Ors. Vs. ITO & Ors. (2000) 245 ITR 538 (SC), the issue was about the granting of deduction u/s. 80J to an industrial undertaking. It was noticed that Section 80J provides for grant of deduction to an assessee who derives income from an industrial undertaking or a ship or the business of a hotel to which the section applies and the section applies to any industrial undertaking, any ship or business of any hotel if the conditions prescribed under subsections (4), (5) and (6) respectively, are satisfied. It was noticed that the words 'industrial undertaking' have not been defined in the Act. In this background of facts, the Hon'ble Court posed the question to itself as to whether the assessee has derived profits and gains from an "industrial undertaking" or from the "business of a hotel". After discussing the issue threadbare, it was held that: 'Industrial undertaking is not given any meaning under the Act, hence it is to be understood as per commo....
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....ot be extended to a device or set of devices which are meant to perform some independent function(s) even though in achieving such desired independent function(s), some sort of 'computer functions' are also involved. Today is an electronic age. Most of the products used by us involve some sort of mechanism, which may be loosely called as computer functions. Take the instance of Television set, Mobile phone and cars etc., all of which, inter alia, involve one form or the other of computer functions. Simply because some 'computer functions' are involved in these equipments or the assistance of computers is taken as such at one stage or the other in their operation, these will not become Computer. The meaning of computer cannot be extended to another machine that operates with the assistance of computer. Conversely an item, which is an integral part of the computer, cannot be defined by it's operations which it is capable of performing, for eg : A wire and plug are electrical items in general but cost of a wire, integrally connected to television, may be added to cost of TV whereas a wire and plug attached to the computer system has to be treated as computer. ....
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....g device, as its main features are email, whatspp, Facetime calls, calls, music, films etc though iPad may discharge some of the functions of computers. In our view iPad is not a substitution of computer/laptop, which have various utilities/functions, though some functions may be common with Ipad. In common parlance also, iPad is considered as communicating device with the some additional features of computer and lastly Apple store do not sell Ipad as computer device rather it is selling it as communicating/entertainment devise. 5.7. There is yet another reason for holding that the iPad is a communication device, as it is having IMEA number, though assessee had denied to have IMEI number, in the subject matter of iPad, however no concrete evidence has been produced on record in this regard. Lastly we are also of the opinion that in case the assessee wishes to claim that iPad is a computer and is required to have depreciation at the higher rate, then in our opinion, the onus is on the assessee to prove that the assessee is entitled to higher depreciation and merely on the basis of deduction/assumption it cannot be held that the iPad is computer. We may rely on Dilip Kumar & Compa....
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.... the ambiguity or defect is removed by the legislature [See Mathuram Agrawal v. Sate of Madhya Pradesh [1999] 8 SCC 667; Indian Banks' Association v. Devkala Consultancy Service [2004] 4 JT 587 and Consumer Online Foundation v. Union of India (2011) 5 SCC 360.]" 5.7. In view of the above, we are of the opinion that iPad is not a computer, hence depreciation at low rate is applicable. Hence this ground of the assessee is dismissed. 6. The third ground of appeal is that the ld. CIT(A) was not justified in sustaining disallowance from out of foreign travelling expenses @ 5% (excluding air ticket & visa fee). Ld. AR had submitted that detail of foreign travelling expense was filed before AO and the books/vouchers were examined. Ld. CIT(A) had restricted to 5% disallowance in respect to expense incurred as per para 12 of the order. 7. Ld. AR had submitted, that this is the case of a company and there cannot be any personal expenditure of the company as alleged by the ld. CIT(A) while upholding part disallowance. 8. The ld. DR for the revenue relied upon the order passed by the lower authorities. It was the contention of the DR that the lower authorities had already grant....