Case Details:

Kohinoor Indian Pvt. Ltd. vs. ACIT

Appeal No.:

ITA Nos. 234 & 316/Asr/2017

Order pronounced by:

ITAT Amritsar

Date of Order:

16-08-2021

In favour of:

Revenue

The assessee had purchased an apple iPad and claimed depreciation at high rates of 60% akin to computers as the assessee was of the opinion that iPad is nothing but basically a small computer. It is important to note that the term “computer” is not defined in the Income Tax Act, 1961. According to the assessee, the iPad is an electronic device capable of data processing and thus qualifies as being a computer.

The A.O. however disagreed with submission of the assessee that iPad should be treated as a computer and disallowed claim for higher rate of depreciation. The A.O. gave following reasons for disagreement:

• The technical specifications of iPad have similarity with iPhone as both share the same operating system.
• Both iPad and iPhone contain an inbuilt 2G/3G/4G connectivity and GPS which is primarily an inherent feature of mobile phone.
• Sim card and mobile network comes under iPhone and iPad.

On the basis of comparison of iPad and iPhone, the A.O. concluded that iPad has similarity with iPhone and thus was a phone and not a computer.

In further appeal by assessee, The L’d CIT(A) upheld the view of the A.O. The L’d CIT(A) stated that:

• The iPad does not have a USB port which is most important for storing and transferring date or documents by way of pen drive.
• iPad does not have a CD Drive and therefore CDs cannot be run on the iPad nor they can be used to transfer data or documents.
• iPad is not compatible with Windows which is the single most popular operating system used by business all over the world and documents like word, excel sheets, power point presentations which are used and exchanged between business are on the windows platform and these cannot be used there in iPad so there is no question of considering iPad as a computer.

The assessee preferred further appeal with Tribunal.

• Availability of USB port is not necessary for describing a device as a computer. Computer existed even before USB port. It is only a means of transferring data which can still be done through charging port of iPad as well as wireless communication such as wifi, Bluetooth etc.
• Availability of CD drive port is not necessary for describing a device as a computer. Computers existed even before CD drive was invented. CDs are meant only for copying data for safe keeping or for copying to other devices. The date in iPad is stored in sold state storage. Also, iCloud is used for storing documents which can be accessed from any other device which is synced. Wifi is used for transferring data from iPad along with USB port.
• Windows is only one of the operating systems used by the computers. Even today, many other operating systems are available such as – MacOS, Linux, Android, Chrome etc. Also, programs like word, excel and power point are available on iPad through from other software providers. The A.O. has presumed that there is no software supplier other than Microsoft.
• iPad has all the essential features of a computer and performs the functions of a computer and has to be treated as a computer. It is pertinent to mention that no cellular call can be made from the iPad in question.
• The assessee also referred the decision of the Karnataka High Court in the case of CIT vs. NCR Corporation P. Ltd. reported 117 com 252/193 DTR 66 wherein it was held that an ATM machine is a computer entitled to higher rate of depreciation. This device also does not have a USB port or a CD drive.
• In fact making a cellular call also cannot be the determinative factor as to whether a device is to be treated as computer or as a phone.

• The meaning of computer cannot be extended to a device or set of devices which are meant to perform some independent functions even though in achieving such desired independent functions, some sort of ‘computer functions’ are also involved.
• Simply because some computer functions are involved in these equipments or the assistance of computers is taken as such at one stage or the other in their operation, these will not become computer. The meaning of computer cannot be extended to another machine that operates with the assistance of computer.
• In this age of technology, most of the gadgets/ machines available or functioning in commercial/ industrial setup are working with the aid of computers whether CNC, computerised printing machine, computerised stitching and designing machine, biometric attendance machine etc. However, these cannot be said to be computer.
• Similarly, the predominant purpose of iPad is a communication and not a computing device, as its main features are email, whatsapp, facetime calls, music, films etc. though iPad may discharge some of the functions of computers.
• In our view, iPad is not a substitution of computer/ laptop which have various utilities/ functions, though some functions may be common with iPad. In common parlance also, iPad is considered as communicating device with some additional features of computer and lastly Apple store do not sell iPad as a computer device rather it is selling it as a communicating/ entertainment device.
• Further iPad is a communication device as it is having IMEI number though the assessee had denied to have IMEI number. The mere assumption of the assessee is not enough to claim iPad as a computer and therefore, depreciation should be applicable at lower rate.