UPS entitled to higher rate depreciation @ 60% being accessories and peripherals forming integral part of computer system

In a recent judgment, ITAT Delhi has allowed depreciation on UPS at the higher rate of 60% allowable at computers following Delhi High Court judgment that  computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system and cannot be used without the computer. 

Case Law Details:
ITA No. 5388/M/2009 Asstt. Year : 2004-05
DCIT vs. Bayer Bioscience P. Ltd.
Date of Order/Judgment: 21/04/2016

Brief Facts of the Case:
In the present case, the assessee had claimed depreciation on UPS at the rate of 60% considering the same as computer peripherals. The AO observed that the UPS was not integral to computers and was capable of being used independently, cannot be allowed depreciation as computer peripherals and therefore, allowed depreciation @ 25% only as applicable to the plant and machinery. On appeal CIT(A) deleted the addition. 

ITAT however observed that CIT(A) had rightly allowed the claim of the assessee for higher depreciation in view of the several judicial pronouncements relied upon by the assessee. In particular, the ITAT relied on the judgment of the Delhi High Court in the case of CIT vs. Orient Ceramics and Inds. Ltd. (ITA No. 65 & 66 of 2011) has held as under :

“13. The third issue pertaining to depreciation on UPS arises only in the Assessment Year 2005-06. The assessee had claimed depreciation on UPS @ 60% whereas the AO had allowed it @ 25% and on this basis, disallowance of 1,470 was made. The issue now stands covered by the judgment of this Court in the case of Commissioner of Income Tax vs. BSES Yamuna Powers Ltd. (in ITA No. 1267 decided on 31.08.2010) wherein it was held that the depreciation @ 60% on such items shall be allowed.”

It is worth to note that Delhi High Court in the case of BSES (supra) had noted the various judicial pronouncements as under:

In the case of ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Kol.), ITAT Tata Bench „B‟, has taken a view that the printer and scanner are integral part of the computer system and are to be treated as computer for the purpose of allowing higher rate of depreciation, i.e., 60%.

3.2 The ITAT, Delhi „F‟ Bench in the case of Expeditors International (India) (P) Ltd. Vs. ld. CIT reported in (2008) 118 TTJ 652 has held that peripherals such as printer, scanners, NT Server, etc. form integral part of the computer and the same, therefore, are eligible for depreciation at the rate of 60% as applicable to a computer.

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