Deputy Commissioner of Income Tax v. Global Trust Bank Ltd
In the Income Tax Appellate Tribunal at Delhi Bench ‘C’
ITA No. 474/Del/2009
Before C.L. Sethi, J.M. and K.D. Ranjan, A.M.
Decided on April 20, 2011

Relevancy of the case: Whether ATM, LAN, WAN fall under the definition of a computer?

Statutes & Provisions Involved

• The Information Technology Act, 2000 (Section 2(i))

Relevant Facts of the Case

• The Revenue filed an appeal against the order dated 17.11.2008 of learned CIT(A) penetrating to the AY 2004-2005.
• The appeal initially stood dismissed for the want of COD approval of the tribunal. Thereafter, the Revenue made a request to recall the aforesaid tribunal’s order to proceed with the appeal on the issue of excess depreciation allowed on LAN, WAN, ATM etc. at 60% as against 25% allowed.
• In the light of tribunal’s present order dated 7.1.2011 & recalling the tribunal’s earlier order dated 17.6.2009, the present appeal was restored to its file to that extent and matter came up for hearing.
• The present appeal is only concerned about grounds on which assessee’s claim to depreciation on LAN, WAN, ATM etc. is at 60% as against 25% allowed by AO.

Prominent Arguments by the Advocates

The learned counsel of Assessee relied upon decisions of:

1. CIT v. BSES Rajdhani Power Ltd. (Delhi High Court) which held that computer accessories and peripherals such as printers, scanners and server etc. formed an internal part of a computer system as they are useless without a computer. The Hon’ble High court thus decided as they are a part of computer system, depreciation rate entitled is 60%.
2. DCIT v. Datacraft India Ltd. (ITAT Special Bench, Mumbai) which held that router is a hardware device that routes data from a LAN to another network connections. So, the special bench has taken the view that router and switches are to be included in the block of computer entitled to the rate of depreciation at 60%.

The counsel further emphasized that here we are concerned about depreciation LAN, WAN, ATM etc. and it’s undisputedly true that LAN, WAN, ATM equipment cannot be used without a computer and hence they can be considered as an integral part of a computer.

Also, in the light of Section 2(i) of the Information Technology Act, 2000 which defines the term “computers” which also includes “computer network”. The term “computer network” means the interconnection of one or more computers using satellite, microwave, terrestrial line or other communication media, and terminals or a complex consisting of two or more interconnected computers whether the interconnection is continuously maintained. From this angle also, LAN, WAN and ATM would undoubtedly form a part of a computer.

Opinion of the Bench

• In the light of the view we have taken above, bench directs the AO to allow depreciation at the rate of 60% on LAN, WAN and ATM equipment.

Final Decision

The appeal filed by the Revenue was thereby dismissed.