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2021 (7) TMI 1380 - AT - Income TaxDisallowance of interest due and payable to the Government of India - assessee acquired helicopters from Government Company setup to meet the long term requirements of ONGC to provide the helicopter services in its critical offshore exploration work - Ministry of Finance releases payment in Foreign Exchange on behalf of the assessee and assessee company was required to deposit the rupee equivalent of these Foreign exchange payments so released along with the commission and incidental charges of 1% ad valorem and crown agent charges payable to Ministry of Finance and for any delay in deposit of the amount due, the Ministry of Finance claims interest - assessee did not claim the amount of interest in the profit and loss account as the Ministry of civil Aviation (MCA) had requested the Ministry of Finance for the waiver of interest and shown the same as contingent liability - CIT-A directing that the deduction be allowed not on accrual but on actual payment of the interest. HELD THAT:- The assessee has taken the loan in the year 1986-87 and interest during that period was also allowed to the assessee as is evident from the assessment order and no disallowance has been made by the revenue. Further, no disallowances were made in A.Y. 1988-89 and A.Y. 1989-90 as is evident from the assessment orders. It is only then in AY 1990-91, in the impugned assessment year the AO has made the disallowance. It is also pertinent to note that subsequently also in A.Y. 1993-94, A.Y. 1994-95, A.Y. 2000-01 and A.Y. 2001-02 similar expenditure claimed by the assessee have been allowed as is evident from the assessment orders. This issue has been going on with the Ministry of Finance and from the correspondences it can be seen that the interest due to the government is payable and request for the waiver have been rejected repeatedly by the Ministry of Finance. Thus, the liability pertains to the current year only and the assessee is following the mercantile system of accounting and thus the interest claimed by the assessee has to be allowed. The assessee has claimed similar expenditure in the following preceding assessment years as well as succeeding assessment years which have been allowed by the department and there being no deviation in the facts of the case in the present assessment year and the claim of interest expenditure made by the assessee has to be allowed. On going through the entire factum of the case, we hereby hold that no disallowance is called for on account of interest payable to the Ministry of Finance. Disallowance of depreciatiion on Westland Helicopters - depreciation on the "Block of Assets" - claim not allowable since the asset was not used in the current year - HELD THAT:- Once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in its subsequent year on the ground that one of the assets is not used by the assessee in some of the years. The concept "user" of assets has to apply upon block as a whole instead of an individual asset. As in the case of Sony India (P.) Ltd. [2017 (1) TMI 1442 - DELHI HIGH COURT] held that the assessee would be entitled to depreciation in respect of assets which were part of block of assets even if said assets had not been put to use during relevant assessment year and had been sold prior to end of accounting year. Similarly, in the case of CIT vs Oswal Agro Mills Ltd. [2010 (12) TMI 947 - DELHI HIGH COURT] as per amended Section 32, deduction is to be allowed in the case of any block of assets, such percentage on the WDV thereof as may be prescribed as per Circular No. 469, dated 23.09.1986 thus it is difficult to accept the submission of the Revenue that for allowing the depreciation, user of each and every asset is essential even when a particular asset forms part of 'block of assets'. The Hon'ble High Court held that the Revenue is not put to any loss by adopting such method and allowing depreciation on a particular asset, forming part of the 'block of assets' even when that particular asset is not used in the relevant assessment year. Thus, keeping in view, the judgments on allowability of depreciation on the "Block of Assets", we hereby hold that the assessee cannot be denied the benefit of depreciation claimed u/s 32 with regard to the Westland Helicopters. Both Appeal of assessee allowed.
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