UPS is an integral part of computer so depreciation should be charged accordingly

IN THE INCOME TAX APPELLATE TRIBUNAL

"B" Bench, Mumbai

Before Shri D. Manmohan, Vice President

and Shri Rajendra, Accountant Member

ITA No. 5312/Mum/2011

(Assessment Year: 2008-09)

Macawber Engineering System (I) Pvt. Ltd., 130-131 Hindustan Room No. 451,

Kohinoor Complex, LBS Marg, M.K. Road, Mumbai 400020

Appellant

Vs.

ACIT, Circle 8-1

Aayakar Bhavan

Vikhroli (W), Mumbai 400083

PAN - AAACM 4275 G

Respondent

Appellant by: Shri V.C. Shah

Respondent by: Shri Sandeep Goel

Date of Hearing: 18.09.2012

Date of Pronouncement: 18.09.2012

O R D E R

Per D. Manmohan, V.P.

This appeal by the assessee is directed against the order dated 23.05.2011 passed by the CIT(A)-22, Mumbai and it pertains to A.Y. 2008-09.

2. The facts concerning the only issue in dispute are that the assessee company is engaged in the business of pneumatic conveying systems. The company is located at Ambarnath, beyond Kalyan wherein there is frequent power failures making it impossible to carry on accounts, designs and other technical works dependent on computers. According to the assessee company use of UPS along with the computer was a necessity so as to obtain technical information uninterruptedly. UPS is like inverter so as to protect from sudden power failures by providing immediate power backup. Assessee claimed that the UPS has to be treated as an integral part of the computer and hence depreciation provided to the computer to be extended to the UPS also. The AO as well as the CIT(A) rejected the contention of the assessee. Hence assessee company is in appeal before us.

3. The learned counsel for the assessee submitted that the ITAT “D” Special Bench Mumbai in the case of Datacraft India Ltd. (9 ITR 712) observed that the expression “Computer” has not been defined in the Income Tax Act or Rules and hence any device, which is essential to run the computer, has to be treated as part of the computer and entitled to the same rate of depreciation as that of the computer.

4. On the other hand, the learned D.R. submitted that UPS can be used with any gadget for uninterrupted power supply and it cannot be treated as part of computer.

5. We have carefully considered the rival submissions and perused the record. The plea of the assessee that there was power failure in Ambarnath and in order to run the computer effectively UPS is an essential ingredient is not disputed by the AO. It is also not the case of the Revenue that the said UPS has been used for any other purpose other than connecting the same to the computer. Having regard to the circumstances of the case and also in the light of the decision of the Special Bench (supra) we are of the view that the assessee is entitled to depreciation on UPS at the rate at which depreciation is available to computers. The AO is directed accordingly.

6. In the result, appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced in the open court on 18th September 2012.

                                                              Sd/-                       Sd/-

                                                         (Rajendra)        (D. Manmohan)

                                                Accountant Member   Vice President

Mumbai, Dated: 18th September 2012

Copy to:

1. The Appellant

2. The Respondent

3. The CIT(A) – 22, Mumbai

4. The CIT– 10, Mumbai City

5. The DR, “B” Bench, ITAT, Mumbai

//True Copy//

By Order

Assistant Registrar

ITAT, Mumbai Benches, Mumbai