The Assessing Officer has taken my printers, scanners and servers out of the computer block and put them in plant and machinery at the general rate. Can I keep them in the computer block?
Yes. The Delhi High Court agreed with the Tribunal that computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and so are entitled to depreciation at the rate applicable to computers, which for that year was sixty per cent. The Revenue's appeal was dismissed.
Decided by the High Court (The Chief Justice and Manmohan J) on 2010-08-31, reported as ITA 1267/2010 (Delhi High Court); assessment year 2004-05. It bears on section 32, section 32(1), section Appendix I of the Income Tax Act 1961, in Deductions & Disallowances and Assessment & Scrutiny matters.
The rate dispute over peripherals recurs every year in the assessment of any business with a large IT estate, and the test the Court applied is functional: can the item be used without the computer? That test decides the ordinary cases — printers, scanners, servers, UPS units, routers on one side; and it is the test to apply to anything new. What must not be carried over uncritically is the figure. Sixty per cent was the rate in the depreciation schedule for AY 2004-05, the year before the Court; the schedule has since been rationalised and the rate for a later year must be read off Appendix I as it stands for that year — do not quote sixty per cent for a recent assessment year without checking. The classification holding and the rate are separate things, and only the classification holding travels.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 2004-05 the assessee claimed depreciation on computer accessories and peripherals — printers, scanners and servers — at the rate applicable to computers, sixty per cent, rather than at the general plant and machinery rate of twenty-five per cent. The Tribunal allowed the claim, relying on ITO v. Samiran Majumdar (2006) 98 ITD 119 (Kol.), in which the Kolkata Bench held that a printer and a scanner are an integral part of the computer system and are to be treated as a computer for the purpose of allowing the higher rate, and on Expeditors International (India) (P) Ltd. v. CIT (2008) 118 TTJ 652, in which the Delhi Bench held that peripherals such as printers, scanners and NT servers form an integral part of the computer and are eligible for depreciation at the rate applicable to a computer. The Revenue appealed.
The appeal was dismissed in limine (para 5). Computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and are therefore to be depreciated as part of the computer block, at the rate applicable to computers for that year (para 4).
The Court expressed its agreement with the Tribunal's view and gave the functional reason for it: the accessories and peripherals in question cannot be used without the computer, which is why they form part of the computer system rather than a separate item of plant. It did not lay down a test beyond that, and it dismissed the appeal as raising no question requiring fuller consideration.
We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer.
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Handle my notice → Ask a CA on WhatsAppYes. The Delhi High Court agreed with the Tribunal that computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and so are entitled to depreciation at the rate applicable to computers, which for that year was sixty per cent. The Revenue's appeal was dismissed. This was decided by the High Court (The Chief Justice and Manmohan J) and bears on section 32, section 32(1), section Appendix I of the Income Tax Act 1961. It is reported as ITA 1267/2010 (Delhi High Court); assessment year 2004-05. The rate dispute over peripherals recurs every year in the assessment of any business with a large IT estate, and the test the Court applied is functional: can the item be used without the computer? That test decides the ordinary cases — printers, scanners, servers, UPS units, routers on one side; and it is the test to apply to anything new. What must not be carried over uncritically is the figure. Sixty per cent was the rate in the depreciation schedule for AY 2004-05, the year before the Court; the schedule has since been rationalised and the rate for a later year must be read off Appendix I as it stands for that year — do not quote sixty per cent for a recent assessment year without checking. The classification holding and the rate are separate things, and only the classification holding travels. If it applies to you, the first step is this: Apply the functional test asset by asset: show that the item cannot be used without the computer and that it forms part of the computer system.
For AY 2004-05 the assessee claimed depreciation on computer accessories and peripherals — printers, scanners and servers — at the rate applicable to computers, sixty per cent, rather than at the general plant and machinery rate of twenty-five per cent. The Tribunal allowed the claim, relying on ITO v. Samiran Majumdar (2006) 98 ITD 119 (Kol.), in which the Kolkata Bench held that a printer and a scanner are an integral part of the computer system and are to be treated as a computer for the purpose of allowing the higher rate, and on Expeditors International (India) (P) Ltd. v. CIT (2008) 118 TTJ 652, in which the Delhi Bench held that peripherals such as printers, scanners and NT servers form an integral part of the computer and are eligible for depreciation at the rate applicable to a computer. The Revenue appealed. The matter was decided on 2010-08-31 by the High Court (The Chief Justice and Manmohan J). On those facts the High Court held as follows. The appeal was dismissed in limine (para 5). Computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and are therefore to be depreciated as part of the computer block, at the rate applicable to computers for that year (para 4).
The Court expressed its agreement with the Tribunal's view and gave the functional reason for it: the accessories and peripherals in question cannot be used without the computer, which is why they form part of the computer system rather than a separate item of plant. It did not lay down a test beyond that, and it dismissed the appeal as raising no question requiring fuller consideration. In the words reproduced by the source cited on this page: "We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer." The decision followed or applied ITO v. Samiran Majumdar (2006) 98 ITD 119 (Kol.) — approved as reproduced in the Tribunal's order; Expeditors International (India) (P) Ltd. v. CIT (2008) 118 TTJ 652 (Delhi) — approved as reproduced in the Tribunal's order.
It was decided by the High Court on 2010-08-31 and is reported as ITA 1267/2010 (Delhi High Court); assessment year 2004-05. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 32, section 32(1), section Appendix I, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed in limine (para 5). Computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and are therefore to be depreciated as part of the computer block, at the rate applicable to computers for that year (para 4). It arises in Deductions & Disallowances and Assessment & Scrutiny matters, on section 32, section 32(1), section Appendix I of the Income Tax Act 1961, and was decided by The Chief Justice and Manmohan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Read the rate off Appendix I for the assessment year in question rather than from this judgment; the sixty per cent figure belongs to AY 2004-05 and the schedule was later rationalised. Keep the invoices and the asset register description consistent — an item booked as 'office equipment' invites the reclassification you are resisting. For software, check whether it is capitalised with the computer or claimed separately, and whether s.40(a)(i)/(ia) issues arise on the payment. Where the officer reclassifies, remember the consequence runs through the block: the reclassification moves the asset into a different block and changes the written down value carried forward, so contest it in the first year rather than after the block has been recomputed.
Validity check could not be completed. Later treatment was not checked, and the current rate in Appendix I was not verified — no live departmental rate table could be opened on this pass. The classification holding (peripherals belong to the computer block) is what this entry carries; the sixty per cent figure is stated only as the rate that applied for AY 2004-05 and must not be relied on for a later year without reading Appendix I for that year. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is short. The passages numbered 3.1 and 3.2 in the document are the Court reproducing the Tribunal's order and the decisions the Tribunal relied on (ITO v. Samiran Majumdar and Expeditors International (India) (P) Ltd.); the Court's own words are at para 4. Only the sentences at para 4 that were re-read verbatim through /docfragment/ are quoted. The continuation of para 4 — "Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%." — was confirmed word for word on the verification pass. It is deliberately still not carried in the key_quote, because the 60 per cent figure is the AY 2004-05 rate and quoting it invites a reader to apply it to a later year; the entry states it only as the effect of the decision for that year. No live departmental page giving the current Appendix I rates could be opened (the WebSearch budget for this session was exhausted), so the current rate for computers is deliberately not stated in this entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed in limine (para 5). Computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system and cannot be used without the computer, and are therefore to be depreciated as part of the computer block, at the rate applicable to computers for that year (para 4).
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