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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year(AY) is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-13 [in short ‘CIT(A)’], Mumbai and arises out of the assessment order u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal filed by the assessee read as under: “1) On the facts and under the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of AO of not treating the intelligent LCD screens as part of M/s. Oxygen Media Services P. Ltd.
computers being eligible for depreciation at higher rate of 60% and allowing depreciation @25% by treating it as part of Plant and machinery. 2) On the facts and under the circumstances of the case and in law, the Learned CIT(A) erred in ignoring the technicians certificate which certifies that the LCDs have various capabilities which render them apart from normal LCD or digital display banners and have electronic data processing capability. 3) On the facts and under the circumstances of the case and in law, the Learned CIT(A) in not allowing depreciation @60% even-though in future years department has allowed depreciation @60% on such intelligent LCD screens."
Briefly stated, the facts of the case are that the appellant –company is engaged in the business of website development, media and communications. The Assessing Officer (AO) noted that the appellant had made certain additions to its fixed assets and claimed depreciation @ 60% , applicable to computers. The assets were, however, seen to be Liquid Crystal Display (LCD) screens and not computers. The AO held that by no stretch of imagination LCD screens could be considered as computers. Considering the appellant’s nature of business, the same could at the most be considered as plant and machinery and would be eligible for depreciation @ 25%. Accordingly, the AO restricted the claim of depreciation on the LCDs to Rs.55.74 lakhs and disallowed the balance depreciation of Rs.78.04 lakhs.
Aggrieved by the order of the AO, the assessee filed an appeal before the ld. CIT(A). We find that the ld. CIT(A) held that (i) in the instant case, it would appear that the LCD screen seems like any other normal LCD screens i.e. visible in public places such as railway stations and airports. However, while the LCD screens at such public places would only be capable of display, it is stated by the assessee that the LCD screens are capable of being connected with a USB drive, it having been provided with a port for that purpose. However, this device does not rise to the level of a computer, since it does not perform any logical or arithmetic functions. It is 2
M/s. Oxygen Media Services P. Ltd. simply capable of playing back certain data by way of images or even spread sheets by accessing them from the UBS drive, (ii) the high rate of depreciation is for computers and not for devices which might behave like computers in certain aspects, (iii) the ability of the impugned LCD screens of electronic interface with data in the USB drive connected to it will give it a capability of playing back the images contained in the data and it would be to that limited extent like a computer, (iv) it needs to be understood that the new Appendix-I clearly grants the higher rate of depreciation of 60% to computers and not to computer like devices. In view of the above facts, the ld. CIT(A) came to a finding that the LCD screen is clearly a computer like device but is not a computer. Therefore, ld. CIT(A) upheld the order of the AO restricting the depreciation to 25% considering it as plant and machinery, thus, disallowing Rs.78,04,863/-.
Before us, the ld. counsel of the assessee submits that the nature of the asset is similar to all-in-one PC; its functioning is like PC with inputs possible through multiple areas. It is stated that as in the case of a normal computer, attachment of modem/router will allow internet access on this device also. Further it is stated that this device can take raw input in the form of multi-media (pictures/videos) in a single or multiple files and convert and display them seamlessly apart from producing an MIS in detailed or summary form including storage capabilities . The ld. counsel files a copy of the certificate dated 21/08/2018 issued by the Centre for Air Borne Systems, Defence Research and Development Organisation (DRDO) Bengaluru, stating that the said devices are automatic electronic data processing machines and can be classified as 3
M/s. Oxygen Media Services P. Ltd.
“Automatic Data Processing Machines and Units” . Thus, it is stated by him that there should be no confusion that the intelligent LCD screens are part of computers and thus eligible for depreciation at higher rate of 60%.
On the other hand the ld. DR submits that the LCD screen is clearly a computer-like device but is not a computer. As per the new Appendix-I, the high rate of depreciation @ 60% is to be given to computers and not to computer-like devices. Thus, the ld. DR supports the order of ld. CIT(A).
We have heard the rival submissions and perused the material on record. During the course of hearing, the ld. counsel has filed a copy of the certificate dated 21/08/2018 issued by the Centre for Air Borne Systems, Defence Research and Development Organisation (DRDO) Bengaluru and we are of the considered view that this would clarify the contentious issue in the present case. Therefore, we set aside the order of the ld. CIT(A) and restore the matter to the file of the AO to make a fresh order as per the provisions of the Act, by examining and cross-verifying the above document in original and after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO.
In the result, the appeal is allowed for statistical purposes. Order pronounced in the open Court on 31/08/2018 Sd/- Sd/- (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/08/2018 Jv., Sr.PS
M/s. Oxygen Media Services P. Ltd.