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December 26, 2022

UPS and printers are part of a computer system and eligible for higher depreciation of 60%

UPS and printers are part of a computer system and eligible for higher depreciation of 60%

Facts and issue of the case

The facts of the case are that the assessee company M/s.Eversendai Construction Private Limited (in short “M/s.ECPL”) was incorporated in 2009. The company is a subsidiary of Eversendai Constructions (s) Pte Ltd, Singapore. The Global Ultimate parent company is Eversendai Corporation, Berhad, Malaysia. 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 (in short “EPC”) Services segment and Engineering & Design Services (in short “EDS”) segment for transfer pricing purposes. Transactional Net Margin Method (in short “TNMM”) was considered as the most appropriate method and the transactions were aggregated segment-wise and concluded to be at arm’s length. Operating margin on Operating cost was selected as the Profit Level Indicator (“PLI”) for both the segments.

 AP disagreed with the assessee’s claim of depreciation of 60% on UPSs, printers, and other accessories. In accordance with the normal block of plant and machinery, AO restricted the depreciation on UPSs, printers, and other accessories to 15%.

Observation of court

TPO order u/s.92CA(3) of the Act, dated 28.10.2016, the AO has passed draft assessment order u/s.143(3) r.w.s.144C(1) of the Act, on 30.06.2017 and proposed TP adjustment as suggested by the TPO. The AO had also made additions towards disallowance of employee’s contribution to PF & ESI for belated remittances under respective Acts and also disallowed excess depreciation claimed on printer, UPS and port switch, etc. Aggrieved by the draft assessment order, the assessee filed objection before the DRP and 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 TP adjustment proposed by the TPO as well as other Corporate Tax additions made by the AO. In pursuant to the DRP directions, the AO has passed final assessment order u/s.143(3) r.w.s.144C(13) of the Act, on 30.06.2017 and determined 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. Aggrieved by the final assessment order, the assessee is in appeal before us.


The ITAT’s ruling in the case of Sundaram Asset Management Co. Ltd. v. DCIT, LTU, reported in [2013] (Chennai-Trib. ), which clearly held that UPS and printers are part of a computer system and eligible for higher depreciation of 60%, resolves this issue in the assessee’s favour. A similar view has been taken by the Mumbai Tribunal in the case of Macawber Engineering System (India) Pvt. Ltd. v. ACIT reported in [2013] The ITAT held that the assessee is entitled for 60% depreciation on UPS and Printers and thus, we direct the AO to allow 60% of depreciation on UPS and Printers as claimed by the assessee.

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