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2016 (9) TMI 506 - MADRAS HIGH COURT

2016 (9) TMI 506 - MADRAS HIGH COURT - [2016] 389 ITR 94 - Claim of higher deprecation - Whether the Appellate Tribunal is correct passing a cryptic order in sustaining the action of the respondent in restricting the claim of higher deprecation of 15% as against the claim of 60% for the computer machineries, thereby confirming the addition of the differential depreciation in the computation of taxable total income? - Held that:- We are of the considered opinion that orders of the authorities and .....

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e and rendered findings, on the rival submissions of the parties. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved. - T.C.A. No. 624 of 2016 - Dated:- 2-9-2016 - S. Manikumar And D. Krishna Kumar, JJ. For the Appellant : Mr.S.Sridhar For the Respondent : Mr.M.Swaminathan ORDER ( Order of the .....

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e for the assessment year 2011-12, on 21.03.2013, admitting a total income of ₹ 40,69,56,311/-. The return was processed under Section 143(1) of the Income Tax Act, 1961 and subsequently, the case was selected for scrutiny under CASS. The Assistant Commissioner of Income tax, Circle-1, Tirunelveli, issued a notice, under Section 143(2), on 08.08.2013. Subsequently, after transfer of the case, another notice under Section 142(1) has been issued on 18.11.2013. In response to the same, the as .....

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of depreciation on electrical equipments, the assessee had claimed 80% depreciation against the "control panel board and transformer , treating them to be electrical equipments, classified under the head "B". Instrumentation and monetary systems for monitoring energy flows in the depreciation table New Appendix-I-III-(8)(ix)B, which works to ₹ 1,80,229/-. The assessing officer was of the view that the above items do not qualify for depreciation at 80%, as these equipments a .....

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le in item 111(1) of the Depreciation schedule without considering the fact that 15% is applicable to Machinery and Plant other than those covered by sub items (2) (3) and (8) below. Item No. 2 Covers Motor cars and No.3 Covers Aero plane, Motor Buses, Commercial Vehicles, Air Pollution and Water Pollution control equipment etc., and No.8, Covers, Wooden parts, Rollers of Flour mill, sugar mills and iron and steel industry (ix) Energy saving devices (A) Specified boilers and furnaces, (B) Instru .....

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whether these items are not covered by sub- items 2 or 3 or 8 of the Depreciation schedule. (iii) The assessing officer failed to consider that those two items come under sub-section 8(B a) Automatic Electrical Load monitoring systems and 8(Ec, Ed) Automatic Voltage controller, power factor controller fcr AC Motors of the schedule and hence 15% depreciation is not applicable but 80% applicable which has been rightly claimed." 5. While considering the definition, "Transformer", as .....

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lant is arguing that depreciation of 80% is allowable under the Act for Automatic Electrical Load monitoring systems and Automatic Voltage controller, power factor controller for AC Motor and that Transformer and Control Panel Board represent Automatic Electrical Load monitoring system and Automatic Voltage controller. A transformer is used to step up or step down the voltage and is not same as Automatic electrical Load monitoring systems and Automatic Voltage controller, power factor controller .....

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rection) treating it as Computers as mentioned in New Appendix-I III (5) of the Income Tax Rules, which according to him, are eligible for depreciation @ 60%. 7. The assessing officer disallowed the claim of higher depreciation at 60%, on the following remarks, "The depreciation in respect above machineries was claimed at the rate of 60% under the head computers. Only computers including computer software is eligible for depreciation at 60% as classified in SI. No.5 under the heading III. P .....

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ax (Appeals)-II, Madurai, contending inter alia that, "(i) The assessing officer failed to consider that computer accessories and peripherals such as printers, scanner and server etc., being integral part of computer system and they cannot used without computer as decided in the case of C.l.T vs BSES Yamuna Power LTD [358 I.T.R 47 (Delhi)]. (ii) The assessing officer failed to consider the decision made in the case A.C.l.T Circle -12(1) vs G.E. Capital Business NewDelhi Process Management s .....

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cessories and peripherals such as printers, scanners and servers etc., form an integral part of computer system and in fact, the computer accessories and peripherals cannot be used without computer and consequently as they are the part of computer system, they are entitled to 60% of depreciation. (iv) The above decision was followed in the case of Omni Globe Information and Technologies India (P) Ltd (131 I.T.D 280 (Delhi)) (v) In the case of DCIT vs Data Craft India Ltd in I.T.A. Nos 7462 & .....

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g Machine and the CTP Machine", the Commissioner of Income-Tax (Appeals)-II, Madurai, vide order in I.T.A.No.12/2014-15, dated 21.10.2014, upheld the findings of the assessing officer, as hereunder: "5.5 Surprisingly, the name of the machine in the invoice is Logic stacker with strapper . Assessee classified this machine with the description computer counter and stacker. It is surprising how Appellant has modified the name of the machine. Normally the name of the machine in the account .....

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ed to the printing press. This machine replaces the earlier method of manual typesetting and preparing the block for printing press Appellant was asked to produce copy of invoice of this machine which is enclosed as annexure 2 of this order This machine is imported from Taiwan and name in the invoice as Register TY-800 AOL Vision plate punching and bending system . The invoice mentions that Register TY-800 AOL Vision plate punching and bending system is a machine with 3 different components as u .....

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bending system . Assessee classified this machine with the description CTP machine. It is surprising how Appellant has modified the name of the Asset. Normally the name of the machine in the accounts should always be what is indicated in the invoice and in my view Appellant has no choice of writing the description as it wishes. When Appellant questioned stated that it is based on the function it performs. 5.9 Increasingly organizations are moving towards computerized integrated manufacturing, wh .....

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ining, cutting metal and creating shapes in the metal but it is more automated and driven by preprogrammed instructions through the computer. it is still a machine assisted by a computer and microprocessor. 5.9 As per the schedule of depreciation, the rate 60% .of depreciation is allowable only to computers and at best may include accessories like servers, scanner sisco router modem etc as held in the decisions cited by the Appellant but can never include the 2 machines acquired by the assessee. .....

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cking of newspaper in correct numbers. The machines do contain computer as one part of the whole machinery, but it should be noted that the computer is dedicated to that machine and does only the functions for that machine. This in my view does not make machines as computers to be eligible for claiming the depreciation at 60%. ......... 5.12 The decisions relied by the Appellant only cover assets like laptops, servers, printers, scanner, sisco router, modem, laptop mouse, Projector, Pendrive, Ne .....

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form part of plant and machinery and thus is eligible for depreciation only at 15%. The AO s decision to treat the machines not as computers but as Plant & Machinery and restricting the claim of depreciation to 15% on these machines is in order and the assessee s arguments are rejected. 10. Being aggrieved by the order of the appellate authority in I.T.A.No.12/2014-15, dated 21.10.2014, the assessee has preferred an appeal in I.T.A.No.2829/Mds/2013, contending inter alia, "(i) The Commi .....

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llowance of the claim of depreciation at 60% and the grant of depreciation at 15% by the Revenue since these items cannot be considered as Computers falling in Appendix-I III (5) of the Income Tax Rules." 11. Before the Tribunal, as regards claim of depreciation @ 80%, on "control panel board and transformer", the appellant-assessee has contended that the same can be classified under the head, B.Instrumentation and monetary systems for monitoring energy flows , as mentioned in New .....

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ed in the depreciation schedule in New Appendix-IIII-(8)(ix)B of Income Tax Rules or Electrical equipment as stated in the New Appendix-I-III-(8)(ix)E under the head Electrical Equipments taking into account of the principles of ejusdem generis. Therefore we hereby direct the Ld. Assessing Officer to grant depreciation @ 80% to the assessee on these above stated items." 12. On the claim of depreciation on computers and computer peripherals, the Tribunal further held, as follows: "We ag .....

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; 13. Being aggrieved by the same, the assessee, has filed the instant Tax Case Appeal, on the following substantial question of law, "Whether the Appellate Tribunal is correct in law, in passing a cryptic order in sustaining the action of the respondent in restricting the claim of higher deprecation of 15% as against the claim of 60% for the computer machineries, thereby confirming the addition of the differential depreciation in the computation of taxable total income, while overlooking t .....

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