Income Tax Appellate Tribunal - Hyderabad
De Shaw India P. Ltd (Earlier Known As De ... vs Dcit, Circle-1(2), Hyd, Hyderabad on 11 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA.No.1180/Hyd/2016
Assessment Year 2009-2010
D.E. Shaw India Pvt. Ltd.,
(earlier known as D.E. Shaw vs. DCIT, Circle-1(2),
India Software Pvt. Ltd.,) Hyderabad.
Hyderabad - 500 096.
(Appellant) (Respondent)
For Assessee : Sri Sista Venkateswarlu &
Sri Shankar Kapse
For Revenue : Sri A. Sitarama Rao
Date of Hearing : 15.12.2016
Date of Pronouncement : 11.01.2017
ORDER
PER D. MANMOHAN, V.P. This appeal by the assessee-company is directed against the order passed by the CIT(A)-5, Hyderabad and it pertains to the A.Y. 2009- 2010. The main case of the assessee is that the Uninterrupted Power Supply (UPS) systems purchased were used as an integral part with the computers and therefore, it is eligible for depreciation at 60% under the block "Computers" and "Computer Equipment". The details of the depreciation claimed by the assessee are as under :
Asset Depreciation Eligible Excess claim of
S.No. Description of the asset. value/ claim of the depreciation depreciation
WDV assessee
1. UPS for Home PC 107500 64500 10750 53750
2. UPS systems for Home 62400 37440 6240 31200
PCs
3. UPS systems for Home 42000 25200 4200 21000
PCs
4. UPS system for third floor 2207511 1324507 220751 1103756
TOTAL 2419411 1451647 241941 1209706
2
ITA.No.1180/Hyd/2016 D.E. Shaw India
Pvt. Ltd., Hyderabad.
2. The A.O. observed that UPS is an electrical device and an instrument for storage of electrical energy for short duration but it is not an essential ingredient for the purpose of the computers. In otherwords, UPS is used to prevent the frequent interruptions in electrical transmission and therefore, it can be categorised as "Electricals" and "Electrical Fittings" on which depreciation is allowable at 10% and thus concluded that the assessee is not entitled to depreciation at 60% on such equipment.
3. Aggrieved, assessee contended before the Ld. CIT(A) that UPS is used with the computer systems itself and under an identical circumstances the Hon'ble Delhi High Court in the case of CIT vs. Sony India P. Ltd., (2012) 210 Taxman 149 (Del.) held that computer accessories and peripherals form an integral part of a computer system on which depreciation @ 60% is allowable and thus contended that even on UPS 60% depreciation is allowable.
4. Ld. CIT(A) observed that computer system can function independently without the UPS; UPS is generally used to ensure uninterrupted power supply to other equipment as well besides computers and hence it cannot be treated as an integral part of the computer system like printers, scanners etc., He also observed that depreciation is provided on computers mainly because technology used in the making of a computer is rapidly developing and the same becomes obsolete very fast. From this perspective, he concluded that the UPS cannot be treated as part of a computer since the technology which goes into making UPS is not rapidly changing and hence it would not become obsolete in a short span. Analysing the issue by applying the functional test he observed that UPS is a source of alternative supply of power to the computer and hence it can only be said to be a part of power supply system and not the computer system. He further stated that UPS is also not inbuilt in the computer as a battery in the laptop to make it an integral part of the computer system since UPS gives external aid to the computer by ensuring uninterrupted power supply in emergency only.
3ITA.No.1180/Hyd/2016 D.E. Shaw India Pvt. Ltd., Hyderabad.
5. Further aggrieved assessee is in appeal before us. At the time of hearing, Learned Counsel for the Assessee, placed before us the following orders of the Hon'ble Delhi High Court as well as the Orders of the ITAT [including the decision of the ITAT, Special Bench, Mumbai in the case of DCIT vs., Datacraft India Ltd., (2011) 9 ITR 712 (Mum.) (SB)] to submit that the function of the CPU is akin to the brain playing a pivotal role in the conduct of the body; just as the brain cannot be independently called as body, even the CPU alone cannot be described as computer but since it is exclusively used for the optimum use of computers it has to be treated as part of the computer system.
1. CIT vs. Sony India P. Ltd., (2012) 210 Taxman 149 (Del.) (HC)
2. CIT vs. Orient Ceramics & Industries Ltd., (2011) 11 taxmann.com 417 (Del.) (HC)
3. Tetra Soft (India) (P.) Ltd., vs. ACIT, Hyderabad (2015) 40 ITR (Trib)
479) (Hyderabad)
4. Smt. Nandury Sobha Rani, Shri Nandury Tejaswy vs. Addl. CIT, Hyderabad [ ITA.No.332 & 333/Hyd/2011 dated 02.07.2012 ]
5. ACIT vs. Ushodaya Enterprises Ltd., Hyderabad (2012) 19 ITR 199
6. Ushodaya Enterprises Ltd., vs. DCIT, Hyderabad (2015) 155 ITD 701 (Hyd.)
7. M/s. Performica Software P. Ltd., vs., DCIT, Hyderabad [ITA.Nos.1015 & 1128/Hyd/2012 dated 13.09.2013].
8. Expeditors International (India) (P) Ltd., vs. Addl. CIT, Delhi ITAT (2010) 2 ITR 153
9. DCIT vs. Datacraft India Ltd., (2011) 9 ITR 712 (Mum.) (SB)
6. The Special Bench of ITAT has elaborately considered the arguments advanced by the Revenue such as the test of predominant function of the device etc., and observed that though keyboard, mouse, routers etc., can independently function and can also be used for other device, so long as it is used as part and parcel of the computer, it should be classified as "Computer" in which event, depreciation @ 60% has to be allowed on the cost of such computers.
7. The Ld. D.R. on the other hand, submitted that UPS can function independently and it cannot be treated on par with computer. He further 4 ITA.No.1180/Hyd/2016 D.E. Shaw India Pvt. Ltd., Hyderabad.
submitted that as per the details furnished by the assessee the UPS systems are installed in third floor without specifying as to whether they are exclusively being used for computers or they were also used for uninterrupted power supply for other electrical fittings such as fans, lights etc.,
8. Joining the issue, Learned Counsel for the Assessee, submitted that for the entire building, generator is provided and the UPS was utilised only for efficient use of computers in the third floor and in fact, it is not the case of the Revenue at any stage; since neither the A.O. nor the CIT(A) brought out such distinction and thus the Ld. D.R. cannot raise a new claim independently.
9. We have carefully considered the rival contentions and perused the record. Both the A.O. as well as the Ld. CIT(A) disallowed the claim of depreciation @ 60% on the limited ground that the UPS systems are meant to ensure uninterrupted power supply to the any other equipment besides computers and hence it is not an integral part of the computer system. Nowhere it was specified that the UPS units provided in the third floor were used for any other purpose. Since it is not the case of either the A.O. or the CIT(A) it cannot now be argued that the UPS systems installed in the third floor are utilised for any other purpose other than for connecting them to the computers. With regard to the interpretation of the expression "Computer Systems", there are catena of decisions placed before us wherein this very issue has come up for consideration. The Hon'ble Delhi High Court as well as the ITAT, Hyderabad Benches, apart from Special Bench of ITAT, Mumbai, considered the expression "Computer" and observed that when a particular system is integrated with a computer it has to be classified as computer software on which depreciation @ 60% should be allowed. In the instant case, there is no dispute that the UPS systems were installed to facilitate uninterrupted power supply to the computers and therefore, it was used as an integral part of the computer hardware. By respectfully following the 5 ITA.No.1180/Hyd/2016 D.E. Shaw India Pvt. Ltd., Hyderabad.
decisions cited (supra), we hold that the assessee-company is entitled to depreciation @ 60% on the cost of purchase of UPS listed above.
10. In the result, as pronounced in the open Court, appeal filed by the assessee-company is allowed.
Order pronounced in the open Court on 11.01.2017.
Sd/- Sd/- (S. RIFAUR RAHMAN) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 11th January, 2017. VBP/- Copy to
1. D.E. Shaw India Pvt. Ltd., Plot No. 573, B & C Road No.1, Jubilee Hills, Hyderabad - 500 096.
2. The DCIT, Circle-1(2), Hyderabad.
3. CIT(A)-5, Signature Towers, Kondapur, Hyderabad - 500 084.
4. Pr. CIT-5, Hyderabad.
5. D.R. ITAT "A" Bench, Hyderabad.
6. Guard File