Indian Kanoon - Search engine for Indian Law

ITA Nos.676 of 09 and 411 of 2010 Ushodaya Enterprises Ltd Hyderabad

15. Briefly the facts are, during the course of assessment proceeding, AO noticed that assessee has claimed depreciation of Rs. 11,43,63,771 @ 60% on the block of computers. On further verification of the details submitted by assessee, AO noticed that the block of computers also include printers, scanners, modems, switches, photo/edit V-sat equipment, UPS, network cables, software, etc. AO after verifying these facts was of the view that computers connected to photo transmission equipment, editing equipment, v-sat and data processing equipment are to be treated as computers. However, scanners, printers, modems, switches, networking cable, transmission equipment and software do not form part of computers. AO opined that every peripheral device connected to the computer does not form part of the computer. He observed that computer runs without peripherals like printer, scanner etc. , but not the other way round. The AO was of the opinion that computers used for photo transmission equipment, decoding equipment v-sat, data processing equipment are eligible for depreciation @ 60% whereas the other peripherals like printers, scanners, modems, switches, photo/edit/equipment UPS, network cables and software form part of plant and machinery, on which, depreciation is allowable @25% only. Accordingly, he proposed to restrict depreciation @ 25% on them. Though, assessee objected to such action, the AO, however, rejecting the submissions of assessee, restricted depreciation @ 25% on routers facsimile systems, modem, v-sat, etc and in the process disallowed an amount of Rs. 1,43,99,145. Being aggrieved of such disallowance, assessee preferred appeal before CIT(A). The CIT(A) following his own order for the AY 2002-03 in case of same assessee, sustained the disallowance made by AO.

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 ITA Nos.676 of 09 and 411 of 2010 Ushodaya Enterprises Ltd Hyderabad 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 software, re- sides in a computer, then it become a part and parcel of a computer and, as long as it is as integral part of a computer, it is classified as a 'Computer'.