iPad is not a computer; Depreciable at a lower rate

Apple iPad or Andriod Tablet is a device pack of numerous features. You may use it as an alternative to a computer as it can perform some of the basic functions of a computer like attending virtual meetings, draft emails, reviewing and editing PPTs, etc.

However, for Income-tax purposes, you cannot categorize an iPad or Tablet as a computer. In an interesting ruling, the Amritsar ITAT has ruled that though the iPad may discharge some functions of computers, it is not a substitution of computer or laptop, which have various utilities or functions. Thus, the same cannot be depreciated at a higher rate.

Facts of the Case

The assessee, M/s Kohinoor Indian (P.) ltd. purchased an apple iPad during the year and claimed depreciation at the rate of 60% by treating the same as a computer.
Assessing Officer (AO) held that Apple has two other variants: iPhone and Mac Book. Based on the following observations, AO held that the iPad had more similarities with iPhone and thus was a phone and not a computer:

• • iPad and iPhone share the same operating system;
  • Both the iPad and iPhone contain an inbuilt 2G/3G/4G connectivity and GPS, primarily an inherent mobile phone feature, whereas Mac Book does not contain the same;
  • The sim card and mobile network come under the iPad & iPhone and not Mac Book.

CIT(A) upheld the order passed by AO, contending that the iPad neither has a USB port nor have a CD drive. Further, the iPad is not compatible with Windows, and hence, there is no question of considering the iPad as a computer.

Assessee contended that it is not practical to use an iPad as a phone. The iPad, which has all the computer features and performs the functions of a computer, is to be treated as a computer. Even otherwise, the size of the iPad is 9.7 inches with a weight of over 600gms. It is not practical to use it as a phone. He further contended that no cellular calls could be made with its iPad as per the specifications.

Further, making a cellular call cannot be the determinative factor as to whether a device is to be treated as a computer or as a phone. Phone calls can also be made using Skype or other such applications, even from desktop computers. As long as a device performs functions as described under the Information technology Act, 2000 or those that define a computer in common parlance, the device is to be treated as a computer.

ITAT Held

Amritsar ITAT held that the term computer is not defined under the Income Tax (I-T) Act. The Tribunal noted that the predominant purpose of the iPad is communication and not a computing device, as its main features are email, WhatsApp, Facetime calls, calls, music, films, etc., through the iPad may discharge some of the functions of computers. The iPad is not a substitute for a computer/ laptop, which has various utilities/functions, though some functions may be common with Ipad. In common parlance also, the iPad is considered a communicating device with some additional computer features. Lastly, the Apple store does not sell iPad as a computer device rather, it is selling it as communicating/entertainment device.

The Tribunal further added that the iPad is a communication device, as it has an IMEI number, though the assessee had denied having the IMEI number in the subject matter of the iPad; however, no concrete evidence has been produced on record in this regard.

Conclusion

ITAT held that the iPad is not a computer; hence depreciation is applicable at a lower rate on account of the following observations:

• • The predominant purpose of the iPad is communication and not a computing device;
  • iPad is not a substitute for a computer/ laptop, which has various utilities/functions, though some functions may be common with iPad;
  • Apple store does not sell iPad as a computer device rather, it is selling it as communicating/entertainment device; and
  • iPad is a communication device, as it has an IMEI number.