TMI Blog2009 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... r written off their WDV is to be reduced from the WDV of the block of assets for the purposes of computing depreciation and not the WDV of individual assets by working out the same item-wise. Therefore, the scrap value of the assets, which have been written off, discarded during the year. is to be reduced from WDV for the purpose of granting depreciation. In this view, we direct that in the light of the decision, the AO should recompute the depreciation only after ascertaining the scrap value of the assets, which have been discarded or written off in the books during the year under consideration. Accordingly, the orders of tax authorities below in this regard are set aside and the AO is directed to recompute the depreciation of the entire block of assets, as directed hereinabove, as well as, as per observations of the Tribunal in the decisions. The ground No. 2 of appeal taken by the Revenue is rejected and ground No. 2 of the appeal of the assessee is allowed in the manner mentioned hereinabove in this order. Deduction claimed u/s 10A - CIT(A), the assessee fulfills all the requirements of s. 10A and is covered within the definitions given in Expln. 2 (vii) to this sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. That on the facts and circumstances of the case the learned CIT(A) has erred in dismissing the ground of the appellant that the notice under s. 143(2) was not served upon the company within the time permitted by the statute and therefore the order of the learned AO under s. 143(3) of the Act was illegal and void ab initio. 2. (i) That on the facts and circumstances of the case the learned CIT(A) has erred in confirming the disallowance of depreciation of Rs. 92,52,253 on fixed assets written off by the appellant company during the year. (ii) Without prejudice to the aforesaid, the learned CIT(A) has grossly erred in estimating the disallowance of depreciation @ 10 per cent on the fixed assets written off and thereby confirming the disallowance of Rs. 92,52,253. (iii) The learned CIT(A) has erred in law in summarily disregarding the various legal pronouncements in favour of the appellant company, while confirming the addition of Rs. 92,52,253. 3. That on the facts and circumstances of the case the learned CIT(A) has erred in failing to adjudicate on the grounds relating to the levy of interest under ss. 234A, 234B and 234D of the Act." The Revenue has taken following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the asset. Some of the assets may not be actively used during the relevant period. However, such assets are available to the concern for use. Here in this case by the own admission of the assessee the assets have vanished from the scene of action. This may tantamount to being removed from the active scene of utility. The asset is not available for use at all. The AO therefore has rightly held that depreciation on such assets cannot be given to the assessee as they are not in existence at all in the block of assets." 7. We have considered the rival submissions of both the parties, perused the record and carefully gone through the orders of tax authorities below as well as the case laws cited by the parties. On going through the orders of tax authorities below, we find that in the instant case, out of the fixed assets worth Rs. 9,25,22,535, the AO estimated the disallowance of depreciation @ 20 per cent as the assets were not located on physical verification and the same were written off by the assessee to the extent of the value of said assets. It means that in the instant case on the principle followed the AO should have disallowed the entire amount of deprecation claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y depreciation on the said equipment for the asst. yr. 1993-94 under a mistaken belief that no depreciation can be claimed thereon because of non-use of the same for the use for the purpose of business, it claimed the depreciation for the asst. yr. 1994-95 during the assessment proceedings before the AO by filing a revised schedule of depreciation. The basis of this claim made by the assessee company was that as per the new scheme of block of assets introduced w.e.f. 1st April, 1988, once the asset is merged into the block of asset, it loses its identity and the question of actual use of a particular asset in the later years is not relevant for allowing depreciation in respect of the same. The Revenue's stand in this regard is that as per the meaning of 'WDV' given in s. 43(6)(c) with reference to the block of asset and in view of r. 5(1) of the IT Rules, 1962, the identity of a particular asset has not been done away with and for the purpose of depreciation allowance, the use of such asset during the relevant previous year has to be established. It is, therefore. pertinent to refer to the provisions of s. 43(6)(e) as well as r. 5(1) which arc reproduced below: "43(6) 'Written do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d new plant and machinery, there is no need of separate computation of depreciation allowance as also separate computation in case of sale or demolition of such assets. The individual working of the machinery also is not necessitated as the new asset falling within the block gets added to the WDV. The effect of all these is that under the new system, even when all the assets of the block are sold, if the block has a positive balance (the moneys payable being less than the WDV), depreciation continues to be allowable even if the asset is no more in existence. Similarly, if only some assets forming part of a block are sold and if the sale proceeds of these assets wipe out the entire value of the block, no depreciation would be available even though some assets of the block continue to be used for business purpose. Therefore, the new scheme as introduced does not require use of individual assets for the grant of depreciation. The legislature also has fully taken into account the possibility of some assets enjoying depreciation without really being put into use. In such a case, when such asset is sold, then the moneys payable in respect of the assets sold exceeding the actual cost woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's claim for depreciation on the said equipment. We, therefore, reverse the same on this issue and direct the AO to allow the claim of the assessee on this count." (ii) In the case of Yamaha Motor India (P} Ltd. vs. Asset. CIT (2008) 11 DTR (Del)(Trib) 229, Tribunal Delhi Bench held as under: "Held: The scheme of depreciation effective from1st April, 1988has done away with asset-wise depreciation by substituting the same by the scheme of block depreciation by pooling all the assets entitled to same rate of depreciation in one block of assets. The WDV in respect of any block of assets can now be adjusted only in the manner as provided in sub-s. (6) of s. 43. The assessment year involved is asst. yr. 2000-01. Therefore, the WDV for this assessment year would be the WDV of the block of assets as at the beginning of the current assessment year under consideration which is to be increased by the actual cost of any asset falling within that block which is acquired by the assessee during the previous year and shall be reduced by the moneys payable in respect of any asset falling within that block, which is sold or discarded or damaged or destroyed during the relevant year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for its business consideration, for that ground alone partial depreciation cannot be disallowed. The instant case was not a case where the assessee had sold the particular asset at a consideration which could be reduced for the purpose of computing WDV of block of assets as provided in s. 43(6)(c). The assessee had discarded a particular asset during year in question, meaning thereby that particular asset was not put to use during the year. It is true that under s. 43(6)(c), it has been provided to reduce the amount of depreciation by reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any. Unless and until scrap value of the machinery which has been discarded, demolished or destroyed during the previous year is ascertained the same cannot be reduced for the purpose of computing depreciation. In the instant case, the machinery in question was only scrapped during the year, that meant it had not been used during the previous year. The scrap value of the same had not been ascertained as yet which would be possible only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may suggest that the company fulfils the condition as enumerated in ss. 10A(2) and 10A(3) of IT Act. He further observed that report in the prescribed proforma by the accountant certifying that the exemption is correctly claimed as envisaged in s. 10A(5) has not been furnished along with the return of income allowed under s. 139(1) of the IT Act. Thereafter, the AO, on considering the submissions of the assessee as well as the provisions of sub-s. (2) of s. 10A introduced from1st April, 1981, disallowed the exemption claimed by the assessee under s. 10A of IT Act, on the reasoning that it is evident that industrial undertaking has (sic-not) begun production in any electronic hardware technology or software technology park. The word "in" itself indicates that the undertaking should be located in software technology park. The assessee has started availing exemption from asst. yr. 1995-96 and this is 8th year of claim of exemption. This also signifies that the assessee is availing exemption by virtue of provision introduced and applicable from financial year 1994-95 relevant to asst. yr. 1995-96. Therefore, the assessee does not fulfill the condition in regard to income derived from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... full copy of Notification No. 30/(RE)/1992-97, dt.22nd March, 1994.Para2.2 of this notification defines the software technology park. The full text of this para reads as under: "Para 2.2: A software technology park (STP) may be set up by the Central Government, State Governments, public or private sector Undertakings or any combination thereof. A STP may be an individual unit by itself or it may be one of such units located in an area designated as STP Complex by the Department of Electronics." 19. A STP, therefore, may be an individual unit by itself located in any area provided the Ministry of Commerce notifies the particular unit in a particular location as STP. It is, therefore, pertinent to examine whether the particular unit of the assessee is covered under the specific notification of the Government of India or not. 20. The CIT(A) also noted in his order that the assessee produced before the CIT(A) copies of all the approvals granted by the competent authority for declaring the assessee's premises as STP. Such copies were also given to the AO. Thereafter, the CIT(A) was of the opinion that the interpretation of the AO that the assessee was not entitled to exemption und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subsequent approvals of the Government of India in the case of assessee has rightly concluded that the assessee fulfils all the requirements of s. 10A and is covered within the definition given in Expln. 2(vii) to this section and so the CIT(A) rightly held that the assessee is entitled to exemption claimed under s. 10A of IT Act and has further rightly deleted the impugned addition. Accordingly, the order of CIT(A) in this regard is upheld. Ground No. 1 of the appeal of the Revenue is rejected. 25. Now we shall deal with ground No. 3 of the appeal of the assessee relating to the issue of levy of interest under ss. 234A, 234B and 234D of the IT Act. 26. Learned Authorised Representative for the assessee submitted that levy of interest under ss. 234A and 234B is consequential in nature. Accordingly, we direct the AO that while giving appeal effect to the order of the Tribunal, he should recompute the levy of interest under ss. 234A and 234B. 27. As far as levy of interest under s. 234D is concerned, learned Authorised Representative for the assessee submitted that in the instant case, the assessment pertains to asst. yr. 2002-03. Hence no interest could be charged against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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