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2006 (1) TMI 548 - AT - Income TaxDepreciation on two foreign made cars - two foreign cars for running them on hire in the past, but during the relevant previous year, the cars were not used for the specified business - whether an asset is entitled for depreciation or not? - HELD THAT:- In the present case, the foreign made cars are not otherwise eligible for depreciation. The only exception is that they can claim depreciation if deployed in the business of running it on hire for tourists. If the cars were used for hiring out for tourists in an earlier assessment year, depreciation was rightly allowed and the cars were rightly brought under a specified block of assets. But when those cars cease to be deployed for running on hire for tourists, the assets become non-eligible for depreciation and become a strange co-traveller in the company of other assets falling under that block of assets, still eligible for depreciation. Therefore, these two foreign cars not used for the specified purpose and not qualified for depreciation should vacate the block of assets. That has rightly been done by the Assessing Officer on the basis of his findings. We do not find force in this contention. Once an asset is necessarily to be expelled from the eligible block of assets its written down value would be calculated by adjusting for the depreciation written off at the specified rate and deducting such depreciation allowed for all the earlier previous years and then work out the written down value. Even if for the purpose of depreciation law, an asset is losing its identity and merging with a block of assets, “the individual value of the asset is still traceable”. Thus, we do not agree with the finding of the CIT(A) that a non-qualified asset should be granted depreciation only for the reason that the asset qualified for depreciation in the earlier assessment year and formed part of a block of asset. The above finding of the CIT(A) is, therefore, vacated. The order of the CIT(A) is not sustainable on this point. The orders of the lower authorities on this factual aspect are not speaking and conclusive. Therefore, we are not in a position to come to a conclusion. Therefore, we remit back the issue to the Assessing Officer for the limited purpose of examining whether these two cars were hired out to tourists in the course of regular business either by the assessee directly or through a lease agreement. If the Assessing Officer finds that as a matter of fact, the cars were deployed in the business of hiring it out to tourists, depreciation may be granted, and if not the claim may be disallowed. The assessee is directed to furnish the details before the assessing authority and the assessee shall be given a reasonable opportunity of being heard on this point. In result, this appeal filed by the Revenue is treated as allowed for statistical purpose.
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