TMI Blog2014 (10) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... set comprised in the block of asset has not been put to use - The proposition is founded on the concept that depreciation is allowable with respect to the block of assets and not the individual assets – relying upon COMMISSIONER OF INCOME TAX Versus BHARAT ALUMINIUM COMPANY LTD. [2010 (8) TMI 26 - DELHI HIGH COURT] - certain Plant & Machinery was not put to use in the relevant year and therefore depreciation thereupon was not allowed - whether an individual asset is put to use in a particular year or not is of no consequence inasmuch as the requirement of law is to establish the use of concerned block of assets and not use of particular assets individually. It has been explained before us that the production of two-three wheeler tyres was abandoned by the assessee and hence the nonuse of such machinery - the assets are forming part of block of assets and there is no requirement of law, each of the item of assets comprised in the 'block of asset' is put to use in order to claim depreciation - CIT(A) made no mistake in allowing assessee's claim for depreciation in relation to part of the machinery relating to the manufacture of two-three wheeler tyres - the assets were already in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the present appeal is concerned the issue relates to a disallowance of depreciation made by the Assessing Officer to the extent of ₹ 1,59,54,775/-. The aforesaid disallowance of depreciation was based on the disallowance made in earlier year's assessments on the block of assets taken over. Pertinently, the factual matrix is that in the previous year relevant to the assessment year 1995-96, respondent-assessee took over the manufacturing unit at Waluj belonging to Ceat Ltd.. The assessee had acquired the said undertaking on a slump sale basis and the operations were started in September, 1994. The purchase consideration paid by the assessee for the assets taken over from Ceat Ltd. was ₹ 41,84,00,330/- determined on the basis of a due diligence report prepared by M/s A.F. Ferguson Co.. The book value of such assets in the hands of Ceat Ltd. was ₹ 25,44,35,362/-. Thus, the purchase consideration paid by the assessee was higher than the written down value of such assets in the hands of Ceat Ltd. by an amount of ₹ 16,39,64,968/-. For the reasons stated by the Assessing Officer in the assessment order pertaining to the assessment year 1995-96, he conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive assessment orders dated 10.01.2005, 21.03.2006 06.12.2006 passed by the Assessing Officer u/s 143(3) of the Act pertaining to the assessment years 2002-03, 2003-04 2004-05 respectively. 10. In all these appeals, the Revenue has raised identical Grounds of Appeal as the issue involved is common. Therefore, we may consider the particulars in relation to the appeal for assessment year 2002-03, wherein the Grounds of Appeal read as under :- 1. Whether in the facts and circumstances of the case, the CIT(A) was correct in allowing the depreciation on machinery used for production of two-three wheeler tyres used for part of year. 2. Whether in the facts and circumstances of the case, the CIT(A) was correct in holding that the Assessing Officer was wrong in disallowing the depreciation on impaired assets. 11. Although, the Revenue has raised two Grounds of Appeal but the grievance is singular relating to the depreciation amounting to ₹ 30,01,373/-. 12. Briefly put, the relevant facts are that during the previous year relevant to the assessment year under consideration i.e. assessment year 2002-03, respondent-assessee company suspended the production of its tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, as per the CIT(A), in the concept of the block of assets introduced w.e.f. 01.04.1988, it is not possible to segregate items falling within a block of asset for the purposes of granting depreciation or restricting the claim thereof. In coming to such conclusion, the CIT(A) took into consideration the reliance placed by the assessee on the following judgements :- (i) CIT vs. Bharat Alluminium Co. Ltd., (2010) 187 taxmann.com 111 (Del); (ii) CIT vs. Oswal Agro Mills Ltd., (2011) 238 CTR 113 (Del); and, (iii) CIT vs. Sonal Gum Industries, (2010) 233 CTR 516 (Guj). 14. Against the aforesaid, Revenue is in appeal before us. Before us, the learned Departmental Representative reiterated the stand of the Assessing Officer to the effect that depreciation on assets which were retired and considered as an impairment loss charged to Profit Loss Account, is not allowable. 15. On the other hand, the learned Representative for the respondent-assessee submitted that the Assessing Officer had failed to appreciate the scheme of section 32 of the Act as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 wherein allowance of depreciation is prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lock of assets', even if it is found that a particular asset comprised in the block of asset has not been put to use. The aforesaid proposition is founded on the concept that depreciation is allowable with respect to the block of assets and not the individual assets. In this context, the CIT(A) has referred to the judgement of the Hon'ble Delhi High Court in the case of Bharat Alluminium Co. Ltd. (supra). In the said case, it was found that certain Plant Machinery was not put to use in the relevant year and therefore depreciation thereupon was not allowed. The Tribunal taking into consideration the concept of 'block of assets' introduced w.e.f. 01.04.1998 held that whether an individual asset is put to use in a particular year or not is of no consequence inasmuch as the requirement of law is to establish the use of concerned block of assets and not use of particular assets individually. The Hon'ble Delhi High Court affirmed the view of the Tribunal and the following discussion is relevant :- After going through these decisions of the various Benches of the Tribunal and the schematic intention behind the provisions relating to depreciation contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... In the instant case, the PSL equipment was purchased and put to use by the assessee in previous year relevant to the Assessment Year 1990-91 and the same had entered into the block asset in that year. It thus lost individual identity for the allowance of depreciation in that year. Since it is not in dispute for the year in question that block of assets was used, the assessee was rightly given the benefit of deprecation in the years in question. The question stands answered against the Revenue. 18. To the similar effect is the judgement of the Hon'ble Delhi High Court in the case of Oswal Chemicals and Fertilizers Ltd., 341 ITR 467 (Del). The Hon'ble Gujarat High Court in the case of Sonal Gum Industries (supra) has also held that in relation to the block of assets, it is not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. According to the Hon'ble High Court, once it is found that the assets are used for business, it is not necessary that all the items falling within the particular block of assets ought to be simultaneously used for being entitled to the allowance of depreciation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the CIT(A) to the effect that since the impaired assets form part of the block of assets, it shall continue to exist for the purposes of allowance of depreciation under the Act as per section 32 of the Act so long as the relevant block of assets continues to exist. 22. In view of the aforesaid discussion, we affirm the order of the CIT(A) and the appeal of the Revenue for assessment year 2002-03 is dismissed. 23. In so far as the other two appeals of the Revenue pertaining to assessment years 2003-04 and 2004-05 are concerned, the issues involved as well as the facts and circumstances are identical to that considered by us in the appeal of the Revenue for assessment year 2002-03 in the earlier paragraphs. Therefore, our decision in the appeal of the Revenue for assessment year 2002-03 would apply mutatis-mutandis in the other two appeals also. 24. Resultantly, appeals of the Revenue in ITA Nos.1879, 1880 1881/PN/2012 pertaining to assessment years 2002-03, 2003-04 2004-05 respectively are dismissed. 25. In the final analysis, all the captioned appeals of the Revenue are dismissed. Order pronounced in the open Court on 15th September, 2014. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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