M/s Crabtree India Ltd. v. Assistant Commissioner of IT
In the Income Tax Appellate Tribunal Delhi Bench ‘B’
I.T.A. No 3638/Del/2008 and 3639/Del/2008
Before Rajpal Yadav J.M. and RC Sharma
Decided on February 25, 2010

Relevancy of the case: Whether speakers, web camera, TV, and other video conferencing equipment fall under the definition of a computer?

Statutes & Provisions Involved

• The Information Technology Act, 2000 (Section 2(1)(t))
• Income-tax Act, 1961 (Section 30, 36, 37)

Relevant Facts of the Case

• The two appeals are directed at the instance of the assessee against the orders of learned CIT(A) dated 08.09.2008 and 05.09.2008 passed for assessment years 2003-04 and 2004-05.
• The assessee company at the relevant time was engaged in the business of trading of electric switch wires etc.
• In assessment year 2004-05, Learned CIT(A) has erred in allowing depreciation at the rate of 25% on video conferencing equipment, speakers, TV sets etc. along with the computers and computer accessories including computers peripherals like printers as against 60% claimed by the assessee on the ground that video conferencing equipment are not computers.
• It was contended by the assessee that EDP installation were data processing and other related activities. However, Assessing Officer did not accept the contention of the assessee on the ground that computer is one of the equipment in the video conferencing and depreciation cannot be claimed on the entire video conferencing equipment which includes TV sets, web-camera etc.

Prominent Arguments by the Advocates

• The learned counsel for the Assessee submitted that the computer is not defined in the Income Tax Act, 1961. The definition available in Sec. 2(1)(t) of the Information Technology Act, 2000 is relevant for understanding the meaning of computer.
• As per the said Act, “computer” means any electronic, magnet, optical or other high speed data processing device or system which performs logical, arithmetic and memory functions by manipulation of electronics or magnetic or optical impulses and includes all input-output processing, storage, computer software or communication facilities which are connected or related to the computer in a computer system or computer network.
• On the strength of the above explanation, it was submitted that video conferencing machine is to be equated with computers and depreciation @ 60% be allowed to the assessee. Learned DR, on the other hand, submitted that speaker, TV, camera etc. attached with a computer if carrying out video conferencing cannot be construed as an integral part of the computer enabling the assessee to claim depreciation @ 60%.

Opinion of the Bench

• The ITAT has considered the definition of a computer system provided in Explanation (A) to sub-section (xi) of Sec.36(1) of the Income Tax Act, 1961. The ITAT thereafter considered the expression “computer” construed by the Institute of Chartered Accountants of India in its study material relating to information technology paper.
• Thereafter, the ITAT considered the judgment of the Hon’ble Supreme Court in the case of CIT vs. Karnataka Power Corporation 247 ITR 268 wherein the issue before the Hon’ble Supreme Court was discussing whether a building can be treated as a “plant”. Hon’ble Supreme Court has held that if the building has been planned and constructed in a way which serves an assessee’s special technical requirement, then such building will be equated to be treated as “plant”.
• So, Assessing Officer shall consider each item in detail and find out which can be equated and construed asa computer for the purpose of granting depreciation @ 60%.
• Assessing Officer shall provide a due opportunity of hearing to the assessee and decide the issue in accordance with law.

Final Decision

• The appeal for the assessment year 2004-05 is allowed for statistical purposes.