TMI Blog2013 (10) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the disallowance of depreciation amounting to ₹ 3,11,13,384/- made by the Assessing Officer and confirmed by the CIT (A) on certain equipment and peripherals by treating them as not forming part of computer. 4. Briefly the facts are the assessee a limited company is engaged in the business 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 ₹ 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 ₹ 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 ₹ 34,86,50,028/-. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware added to the fixed assets are licensed software and any software in the nature of know- how, patents, copy rights, trade marks, licenses, machines or any other business or commercial rights of similar nature are to be treated as intangible assets. He therefore held that the software purchased by the assessee are 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the country is used by news reporters who shoot news events and convert them into MPEG digital files at the remote office. These MPEG files are transmitted trough wireless channels and are received at the central news channel office. The publication of internet editions of newspapers and continuous online monitoring of these editions 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 compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the expression computer in common parlance as well as commercial parlance in the context of availability of depreciation at higher rate of 60% in the case of router and switches whether to be treated as computer held as under:- 25. Thus in order to determine whether a particular machine can be classified as a computer or not, the predominant 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... network (such as copper cables, fibre or wireless) or different network standards. Each network interface is a small computer specialized to convert electric signals from one form to another. Routers connect two or more logical subnets, which do not share a common network address. The subnets in the router do not necessarily map one-to-one to the physical 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the computer, as in the case of operating software in the computer. In such a situation, hardware in question can be considered as a part of a computer and hence a 'computer'. Per contra, when the machine is not used as a necessary assessor or in combination with a computer, it cannot be called a 'Computer component'. 31.3 Coming to the Routers, 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 sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee solely on the reasoning that every peripheral device connected to the computer cannot form part of the computer. However, such view of the revenue authorities cannot be the correct proposition of law in view of the ratio laid down by the Hon ble Special Bench in case of DCIT vs. Datacraft India Limited (supra) by holding that any device when they are used along 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 . ..... X X X X Extracts X X X X X X X X Extracts X X X X
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