Depreciation on iPad / tablets under Income Tax Act 1962

iPad is a communication device or a computer?

Under the income tax act, a computer carries a higher rate of depreciation than a communication device. So, it is pertinent to know whether depreciation an iPad will be applicable of a communication device or of a computer.

In a recent judgement in the case of Kohinoor India, the Amritsar Bench of ITAT held the iPad as a communication device. This article will discuss various aspects of the iPad /smartphones being a computer or communication device.

Income Tax Act,1961, provides a higher rate of depreciation, 40% on Computer. However, the term Computer is not defined in the Income Tax Act. Before entering debate whether iPad is a computer or communication device, let us see the definition of computers defined at another places/act:

As per Section 2(1) (i) of The Information Technology (IT) Act, 2000

“Computer” means any electronic, magnetic, optical, or other high-speed data processing device or system which performs logical, arithmetic and memory functions by manipulations of electronic, magnetic, or optical impulses, and includes all input, output, processing, storage, computer software or communication facilities which are connected or related to the Computer in a computer system or computer network.

As per the Oxford dictionary, Computer means

“An electronic device which is capable of receiving information (data) in a particular form and of performing a sequence of operations in accordance with a predetermined but variable set of procedural instructions (program) to produce a result in the form of information or signals”.

Points in favor of iPad as Computer:

  1. Voice calls can’t be made through an iPad like Computer. Sim cards are to facilitate network.
  2. iPad is used to work on excel sheets, MS word and to see the PowerPoint presentation.
  3. Data can be stored on an iPad and can be processed also.
  4. Computer software can be run on an iPad.
  5. iPad can be used to exchange emails, and the Wi-Fi version doesn’t have an IMEI number.
  6. iPad is not a substitute for iPhone and is big in size and weight.
  7. iPad fulfils the characteristics of the definition mentioned in the IT Act 2000.

Points in favor of iPad as a communication device

  1. With the iPad, facetime and other video/audio calls can be made.
  2. Ipad has functions different from iPhone and Mac books. iPad uses a similar operating system to the iPhone, whereas MacBook uses “OS-X”.
  3. Sim cards and mobile networks are available on both iPad and iPhone.
  4. Apple sells it as different from MacBook.

iPad and smartphones both are akin to computers as per the definition under Information Technology Act,2000, being capable of processing, assimilating, collating information and storage of data and can be used for accounting, automation, gaming etc. In terms of storage, both have internal and expandable memory.

In today’s world, a computer is so integrated with other machinery that every machine can’t be termed a computer. There are audio calls /video calls available on televisions/car audio devices. The primary function of a device should be considered while deciding its nature.

ITAT, in its order, held that iPad is not a computer device, and a higher rate of depreciation is not allowed. The honorable bench has observed that the iPad, in common parlance, is an entertainment and communication device and not a substitute for a computer or laptop.

This order has opened a debate among tax professionals. Data can be processed and excel /word/ppt files can be worked upon these devices. The mere small size should not deprive these devices to fall in the category of Computers.

In the post COVID world, smart mobile phones and iPad / tablets have emerged as substitutes for computers and laptops. To avoid litigations, Government might come up with the clarification and revised schedule of depreciation under Income-tax Act,1961, allowing depreciation on iPad at a rate permitted for Computers.