[Opinion] Robot Gets Just 15% Depreciation!

Meenakshi Subramaniam – [2023] 149 taxmann.com 326 (Article)

New income tax officer:

“Depreciation means value starts vanishing. So, as you are asking for depreciation for robot, has the robot started vanishing? “

Assessee:

“But…”

New Income Tax officer:

“Tell, me, how much of robot has disappeared ? When the robot vanishes completely, you will get full depreciation.”

It’s rather strange that robots get a raw deal, compared to computers, regarding depreciation. Recently, the Chennai Tribunal held that robot can get 15% depreciation, only and not 60% depreciation, available for computer. Of course, now the depreciation for computers too has come down. Till A Y 2017-18, computers got 60 per cent depreciation, while from 2018-19, its 40 per cent, but still the robot has to be satisfied with 15% depreciation.

[2023] 149 taxmann.com 137 (Chennai – Trib.) Robotix Learning Solutions (P.) Ltd. v. Income Tax Officer

Order

The assessee claimed depreciation on Robotix kits @ 60%. The rate was reduced to 15% by the Assessing Officer in the assessment order citing the ITAT order dated 12.09.2018 in assessee’s own case. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer.

The assessee filed an appeal against the CIT (Appeals), holding that the Commissioner had erred in sustaining the disallowance of presumed excess claim of depreciation on Robotix Kits without assigning proper reasons and justification and consequently erred in sustaining the addition of Rs. 16,19,956/- in the computation of taxable total income without assigning proper reasons and justification.

The CIT (Appeals) failed to appreciate that the claim of depreciation at 60% was erroneously reduced to 15% and ought to have appreciated that the restriction of the depreciation based on wrong understanding of the facts and mechanical adoption of the findings in the earlier appellate orders was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law

The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.

The assessee’s pleas was directed against the order of the ld. Commissioner of Income Tax (Appeals), Chennai dated 05.03.2020 relevant to the assessment year 2016-17.

On being aggrieved, the assessee appeared in appeal before the Tribunal.

The Chennai Tribunal heard both the sides, perused the materials available on record and went through the orders of authorities.

The appeal raised grounds (No. 6 & 7) related to disallowance of excess depreciation claimed on Robotix Kits of 16,19,956/-.

Before Tribunal, the arguments of the ld. Counsel for the assessee was that robotix kit is a part and parcel of the computer and therefore, the assessee is eligible for claiming 60% depreciation. Further by relying upon the decision of the Tribunal in the case of Financial Software and Systems (P.) Ltd. v. ACIT [I.T. Appeal Nos. 2564 & 2566 (Chny) of 2018, dated 7-6-2019] wherein, the Tribunal has considered that the ATM machine is eligible for 60% depreciation for the reason that computer is attached to ATM and similarly, it was prayed for allowing 60% depreciation.

On other hand, the ld. DR strongly relied upon the decision of the Tribunal in assessee’s own case for the assessment year 2014-15 in ITA No. 2669/Chny/2017 dated 12.09.2018 and supported the orders of authorities below.

The Tribunal said it had heard the rival contentions. During the assessment year 2014-15 similar issue on an identical fact was subject matter in appeal and after considering the submissions of the assessee, the Coordinate Benches of the Tribunal has observed as under:

“4. We heard Shri B. Sagadevan, the Ld. Departmental Representative also.
Admittedly, the assessee purchased robotix kits for the purpose of its business. Since computers are operating the robotix kits, the assessee claimed depreciation @ 60% which is eligible for computers. The question arises for consideration is whether robotix kits can be considered as computer merely because the same are operated through computer? It is common knowledge that nowadays the entire industry is automated and machineries are operated through computer. It does not mean that the entire industrial undertaking was a computer. The computer or software installed therein may be used for operating industrial machineries. In this case also, the computer or software attached is used for operation of robotix kits. Therefore, it cannot be construed as if the robotix kits itself is a computer. This Tribunal is of the considered opinion that the computer is totally different which comprises processing data and not the machinery which undertakes works as per the instruction given through the computer. Therefore, computer is a different one and robotix kits are entirely different machineries. Hence, this Tribunal is of the considered opinion that the assessee is not eligible for depreciation @ 60% as claimed. Accordingly, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.”

By following the above decision of the Tribunal, the Assessing Officer reduced the claim of depreciation on Robotix kits @ 15%, which was rightly confirmed by the ld. CIT(A). The Chennai Tribunal held:

“We find no infirmity in the order passed by the ld. CIT(A) on this issue.”

The case law relied on by the ld. Counsel for the assessee in the case of Financial Software and Systems (P.) Ltd. (supra) has no application to the facts of the present case for the reason that the computer or software attached is used for operation of robotix kits and therefore, it cannot be construed as if the robotix kits itself is a computer. Thus, the Chennai Tribunal held:

“The ground raised by the assessee is dismissed.”

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