UPS and Printers are part of Computer Systems, 60 % Depreciation allowable: ITAT

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By Yogitha S. Yogesh – On December 21, 2022 10:49 am

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that UPS and Printers are part of computer systems and 60 % depreciation allowable.

The assessee company M/s.Eversendai Construction Private Limited (“M/s.ECPL”) is a subsidiary of Eversendai Constructions (s) Pte Ltd, Singapore. The company is engaged in the business of engineering, design, detailing, steel fabrication, development of residential buildings and commercial complexes.

The international transactions entered into by M/s.ECPL were segregated into two segments, i.e. Engineering, Procurement & Construction (“EPC”) Services segment and Engineering & Design Services (“EDS”) segment for transfer pricing purposes.

The TPO noticed that the assessee has adopted TNMM as the most appropriate method for both segments i.e. EPC & EDS.  The TPO has accepted international transactions with AE to the EDS segment at ALP.  However, in respect of the EPC segment, the TPO has conducted a fresh TP study and has rejected three comparables selected by the assessee and worked out an average PLI of 13.82% and then, compared with the PLI of the assessee at 8.96% and suggested TP adjustment of Rs.85,15,716/- to the international transaction of the assessee with its AEs. 

The AO had also made additions towards the disallowance of employee contribution to PF & ESI for belated remittances under respective Acts and also disallowed excess depreciation claimed on the printer, UPS and port switch, etc. The DRP vide their order passed u/s.144C(5) of the Act, dated 05.05.2017 rejected the objection filed by the assessee and upheld the TP adjustment proposed by the TPO as well as other Corporate Tax additions made by the AO. 

Under the DRP directions, the AO has passed the final assessment order u/s.143(3) r.w.s.144C(13) of the Act, on 30.06.2017 and determined a total income of Rs.1,80,55,800/- by making additions towards TP adjustment, excess depreciation on printer, UPS & port switch, and disallowance of reimbursement of expenses. 

The assessee had claimed 60% depreciation on UPS, Printers and other accessories.  The AO has restricted depreciation on UPS printers by @15% which applies to normal blocks of plant & machinery. 

A Coram consisting of Shri V. Durga Rao, Judicial Member and Shri G Manjunatha, Accountant Member viewed that in the case of Sundaram Asset Management Co. Ltd. v. DCIT, it has been held that UPS and Printers are part of computer systems and eligible for higher depreciation of 60%. 

While allowing the appeal, the Tribunal held that the assessee is entitled to 60% depreciation on UPS and Printers and directed the AO to allow 60% of depreciation on UPS and Printers as claimed by the assessee.To Read the full text of the Order CLICK HERE

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