INCOME TAX OFFICER vs. SAMIRAN MAJUMDAR ITAT, KOLKATA ‘B’ BENCH Dinesh K. Agarwal, J.M. & R.P. Rajesh, A.M. ITA No. 528/Kol/2005 1st August, 2005 (2006) 101 TTJ (Kol) 501 : (2006) 98 ITD 119 (Kol) Legislation referred to Section 32, Case pertains to Asst. Year 2001-02 Decision in favour of Assessee Depreciation—Rate—Printer and scanner usable with computer system—Printer and scanner are integral part of computer system—They cannot be used without the computer—Therefore, they are to be treated as computer for the purpose of allowing higher rate of depreciation i.e., 60 per cent—CIT vs. Karnataka Power Corporation (2000) 162 CTR (SC) 249 : (2001) 247 ITR 268 (SC) and CIT vs. Kanodia Warehousing Corpn. (1980) 121 ITR 996 (All) applied (Paras 6 & 7) Conclusion : Shriya and Associates 22/04/2010 Printer and scanner being integral part of the computer system are to be treated as computer for the purpose of allowing higher rate of depreciation. In favour of : Assessee Counsel appeared : S.K. Jain, for the Revenue : A. Srimani, for the Assessee ORDER Dinesh K. Agarwal, J.M. : This appeal preferred by the Revenue is directed against the order passed by the learned CIT(A), dt. 25th Jan., 2005 for the asst. yr. 2001-02 taking following grounds of appeal : "1. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in fact and in law in deleting the disallowance of Rs. 3,70,628 made on account of depreciation. 2. That on the facts and in the circumstances of the case, the order of the learned CIT(A) be reversed and that of the AO restored." 2. The learned Departmental Representative submits that it was found by the AO that in this year the assessee has claimed depreciation on colour xerox machine at the rate of 60 per cent which is admissible on computer considering the xerox machine as good as computer. He further submits that the assessee was asked to show cause as to why 25 per cent of depreciation should not be allowed instead of 60 per cent claimed by the assessee. But the assessee has failed to file any explanation, therefore, the AO has allowed 20 per cent depreciation on colour xerox machine and excess claim of depreciation was added back in the income of the assessee. He further submits that in the first Shriya and Associates 22/04/2010 appeal the learned CIT(A) has called for the remand report from the AO. The AO deputed an Inspector who visited the assessee’s business place and found that the machine of Model OCE 9400 itself is not a computer. It runs with the help of computer. But the computer for its operation does not depend on the said machine and can work independently like any other computer. There is no software loaded in the said machine and it can only run with the help of the software of any other computer. The Inspector, therefore, was of the view that the said machine is an external device attached to the computer with the help of the cables. In the light of the report of the Inspector, the AO submitted his report that the machine itself is not a computer, therefore, the assessee is not entitled to claim higher rate of depreciation, i.e., 60 per cent. The learned Departmental Representative further submits that the learned CIT(A) despite the fact that in the depreciation schedule of the fixed assets the assessee has mentioned the name of the machinery as colour xerox copier which is otherwise entitled to normal rate of depreciation, i.e., 25 per cent has erred in allowing depreciation at the rate of 60 per cent on the printer and scanner which is not permissible under the depreciation schedule of the IT Rules, 1962. He further submits that photocopy of the printer and copying machine appearing at p. 15 of the paper book, clearly reveals that it is a separate machine not attached to the computer. Therefore, there is no error in the order of the AO in allowing depreciation at the normal rate, i.e., 25 per cent. He, therefore, submits that the order passed by the AO be restored. 3. On the other hand, the learned counsel for the assessee while strongly relying on the order of the learned CIT(A) further submits that printer and scanner are the part of the computer system, therefore, the assessee is entitled to the depreciation at the rate of 60 per cent as admissible to the computer. He further submits that the term ‘computer’ has not been defined under the Act. However, the Institute of Chartered Accountants of India in its study material PE II, Information Technology Paper VI has defined the term computer and according to which the computer includes printer and scanner. He Shriya and Associates 22/04/2010 further submits that the assessee has purchased vide way bill and invoices appearing at pp. 21 to 29 of the paper book one scanner model ‘M’ Contex FSS 8300 Copy DSP Full Scale for scanning an AO (36") size drawing/map/document for converting paper document into digital document and one OCE 9400 high speed LED printer with 2 rolls 32MB RAM under frame/stand, firmware, printer, controller, printer drivers, and necessary cable and connectors, a wide format 36" laser printer for printing, engineering drawing/map/other wide document, with in-built controller. He further submits that the above two items are part of the computer intended to be the device/components—one scanner, an input device and a printer, an output device. The learned counsel for the assessee while objecting the Inspector’s report and the remand report of the AO further submits that the software is loaded in the Central Processing Unit (CPU) of the personal computer through which the printing command is given to the controller which consists of memory and storage facility. The purchase invoice for the printer clearly mentioned that the cost included printer drivers, controller, two rolls of 32 MB RAM, etc. The software (printer driver) can be loaded only in the CPU of the computer and not in the printer. All the components that are connected to the CPU have their own drivers to operate and are loaded in the CPU. As regards the scanner (Model Contex FSS 8300) the learned counsel for the assessee submits that it is an input device which can be connected to the computer that will scan or ‘copy’ pictures or objects so that images can be stored as a file in the computer. This is corroborated by the manufacturers’ brochures as mentioned above. He, therefore, submits that there is no error in the order of the learned CIT(A) in allowing 60 per cent depreciation on printer and scanner as claimed by the assessee and, therefore, the order passed by the learned CIT(A) be upheld. 4. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that the term ‘computer’ has not been defined under the Act. However, the computer system has been defined under Expln. (a) to sub-s. (xi) of s. 36(1) of the IT Act which reads as under : Shriya and Associates 22/04/2010 "’computer system’ means a device or collection of devices including input and output support devices and excluding calculators which 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." 5. We further find that the Institute of Chartered Accountants of India in its study material PE II, Information Technology Paper VI has defined the term computer as follows : "The term ‘computer’ can logically be applied to any calculating machine. However, in common usage, the definition of a computer has become more limited in a contemporary usage. We now define a computer as an electronic data processing device capable of receiving input, storing sets of instructions for solving problems and generating output with high speed and accuracy. Computers are composed of switches, wires, motors, transistors and integrated circuits assembled on frames. The frames form components such as keyboards, printers, visual display units, disk drives, magnetic tape drives and central processing units. These components are wired together into a network called a computing system often called a computer." 6. We further find that Inspector after verifying the function of the printer and scanner reported that it runs with the help of computer and the said machine is external device attached to the computer with the help of cables. The AO on the basis of the said report of the Inspector was of the view that the machine in question is not a computer vide his remand report dt. 23rd Dec., 2004 appearing at p. 11 of the assessee’s paper book. However, from the fair reading of the IT Inspector’s report, we find that the printer and scanner cannot be used without the computer, i.e., they are part of the computer system. We further find that the Hon’ble Allahabad High Court in CIT vs. Kanodia Warehousing Corpn. (1980) 121 ITR 996 (All) has laid down test as to Shriya and Associates 22/04/2010 whether the subject-matter involved is a plant or not which reads at p. 1001 as under : "It would be seen that the test is whether the subject-matter involved, that is, a building or a structure or a part thereof, constitutes an apparatus or a tool of the trade of the taxpayer or it is merely a space where the taxpayer carries on his business. For this purpose the use which is made of the subject-matter under consideration is to be kept in view. If, as noted above, the building, structure or a part thereof is something by means of which the business activities are carried on, it would amount to a plant but where the structure plays no part in the carrying on of those activities but merely constitutes a place within which they are carried on, it cannot be regarded as a plant." A Full Bench of the Hon’ble Supreme Court in the case of CIT vs. Karnataka Power Corporation (2000) 162 CTR (SC) 249 : (2001) 247 ITR 268 (SC) held at p. 268 (short notes) that : "The question whether a building can be treated as plant, basically, is a question of fact and where it is found as a fact that a building has been so planned and constructed as to serve an assessee’s special technical requirements, it will qualify to be treated as a plant......." 7. In view of the above facts and following the ratio of the decisions including the decision of the Hon’ble Supreme Court in the case of Karnataka Power Corporation (supra), we are of the view that the printer and scanner are integral part of the computer system, therefore, they are to be treated as computer for the purposes of allowing higher rate of depreciation, i.e., 60 per cent and accordingly, we decline to interfere in the order passed by the learned CIT(A) on this account. The grounds taken by the Revenue are, therefore, rejected. 8. In the result, the appeal stands dismissed. ******* Shriya and Associates 22/04/2010
Posted on: Sat, 21 Sep 2013 10:47:08 +0000
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