TMI Blog2016 (2) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... alled as computer because these equipments also do not perform logical, arithmetical or memory functions. In the light of the meaning of 'computer' discussed in earlier paras, we are inclined to agree with the view taken by the Kolkata Bench in Samiran Majumdar's case (2005 (8) TMI 293 - ITAT CALCUTTA-B ). Therefore, hold that the routers and switches in the circumstances of the case, are integral part of Computer, entitled to depreciation at the rate of 60 per cent. - Decided in favour of assessee - ITA No.4932/Mum/2015 - - - Dated:- 11-1-2016 - Shri Joginder Singh, Judicial Member For The Assessee : None For The Revenue : Shri V.S. Jadhav-DR ORDER The assessee is aggrieved by the impugned order dated 12/08/2015 of the Ld. First Appellate Authority, Mumbai, the ground raised in this appeal pertains to not allowing claimed depreciation at the rate of 60% and holding that the assessee is eligible for depreciation at the rate of 15% on routers and switches etc. ignoring the decision in DCIT vs Datacraft India Ltd. (2010) 40 SOT 295 (Mumbai)(SB) and the case of M/s UAE exchange and financial services ltd. (ITA No.91/Bang/2014) order dated 10/10/2014 and further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.2. It is noted that the ld. Assessing Officer has observed that though UPS, routers and switches, etc are connected to the computers but cannot be considered to be integral part of computers, consequently, relying upon the decision of the Delhi Bench in the case of Nestle India Ltd. vs DCIT (111 TTJ 498) disallowed the claim of the assessee. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, I have considered the rival submissions at length in the light of material placed before me and precedents relied upon. The chief question which falls for my adjudication/consideration is whether routers and switches are part of computer or not for the purposes of depreciation. Section 32(1) provides that where assets are owned wholly or partly by the assessee and used for the purpose of business or profession, deduction shall be allowed. Clause (ii) of subsection (1) provides that in case of any block of asset, the deduction shall be allowed at such percentage on the written down value ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are not programmable and capable of being used in conjunction with external files, or more of 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; 2.4. At this juncture it will be relevant to note that clause (xi) of section 36(1) was inserted by the Finance Act, 1999 with effect from 1-4-2000 with a view to allowing relief in overcoming the immediate problem of Y2K likely to come up at the close of the calendar year 1999. From the Budget Speech of the Finance Minister in 1999 (236 ITR (St.) 26) it can be seen that the Government assisted business sector in overcoming the Y2K problem by proposing that the expenditure incurred in making the computer system Y2K compliant, be allowed as revenue expenditure. It was with this intention that clause (xi) of section 36(1) was inserted which is relevant only for financial year 1999-2000 providing for deduction of any expenditure incurred by the assessee on or before the 1-4-1999 but before the first day of April, 2000, wholly and exclusively in respect of a non-Y2K comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of electronic data interchange and other means of electronic communication, commonly referred to as electronic commerce , which involves the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto. The statement of Objects and Reasons of this Act divulges that new communication systems and digital technology have made dramatic changes in the way we live. A revolution is occurring in the way people transact business. Business and consumers are increasingly using computers to create, transmit and store information in the electronic form instead of traditional paper documents. Information stored in electronic form has many advantages. 2.8. Having seen the object of the Information Technology Act, 2000, the question which arises for consideration is that can I import the definition of 'computer', as given in it, in the Income-tax Act, 1961 for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot merely going by the dictionary meaning but by applying common parlance and commercial parlance tests as well as by analysing the intendment of providing for higher rate of depreciation. I may refer to several case law to analyse as to which formula would aptly suit the situation in the given case. The ratio laid down in following cases further throw light. (i)ITO v. Samiran Majumdar [2006] 98 ITD 119(Kol.); (ii)Container Corpn. of India Ltd. v. Asstt. CIT [2009] 30 SOT 284(Delhi); (iii)Asstt. CIT v. Cincom System India (P.) Ltd. [IT Appeal No. 1534 Delhi of 2008, dated 13-4-2009]; (iv)ITO v. Nirmal Datacom Leasing (P.) Ltd. [IT Appeal No. 9392 (Mum.) of 2004, dated 3-5-2007]; (v)ITO v. Key Note Capital (P.) Ltd. [IT Appeal No. 7049 (Mum.) of 2004, dated 22-11-2007]; (vi)Expeditors International (India) (P.) Ltd. v. Addl. CIT [IT Appeal No. 4364 (Delhi) of 2006, dated 19-7-2007]; (vii)Poonawala Finvest Agro (P.) Ltd. v. Asstt. CIT [2008] 118 TTJ (Pune) 68. 2.11. In Indian Hotels Co. Ltd. v. ITO [2000] 245 ITR 538(SC), the issue was about the granting of deduction under section 80J to an industrial undertaking. It was noticed that sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in common sense and as popularly understood, refers to any electronic or other high speed data processing device which performs 'logical, arithmetic and memory functions on data' (hereinafter called the 'computer functions') and includes all input and output devices which are connected to or related to it. Para 24 of the assessment order indicates that the Assessing Officer was also of the opinion that the meaning of the word computer , as understood in the common parlance is 'an electronic device for storing and processing data and making calculating and controlling machine which also includes input device like keyboards or mouse and the output devices like the printer or monitor.' 2.15. I would like to clarify here that the meaning of computer cannot 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, Mobil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961. Accordingly it also needs to be assigned the meaning as it is understood in common parlance. When a packet of data arrives at a router, its header information is scrutinized by the router. Based on the destination and source IP addresses of the packet, the router decides which neighbour it will forward it to. 2.18. So far as, use of routers/switches is concerned, the routers are crucial device that let the messages flow from one computer to another. Router has two separate but related jobs, viz., (a) to ensure that the information does not go where it is not needed and (b) it makes sure that the information does make it to the intended destination. 2.19. A router is a networking device whose software and hardware are customized to the tasks of routing and forwarding information. A router has two or more network interfaces, which may be to different physical types of 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of computer hardware. 'Software', on the other hand, consist of the programs and applications that run on computers. Because software runs on computer hardware, software programs often have 'system requirements', that list the minimum hardware required for the software to run. 2.23. In short, Router is a hardware device that routes data (hence the name) from a local area network (LAN) to another network connection. A router acts like a coin sorting machine, allowing only authorized machines to connect to other computer systems. Most routers also keep log files about the local network activity. Now the question is whether this machine can be used independent of Computer. If yes, then it cannot be called Computer Hardware in all circumstances. 2.24. When Computer Hardware , is used as a component of the computer, it becomes part and parcel 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 assessory or in combination with a Computer, it cannot be called a &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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