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TMI Blog2006 (1) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961. 2. The assessee had purchased two foreign cars from the State Trading Corporation during the previous year 1995-96 which formed part of a block of assets pertaining to the assessment year 1996-97. During the relevant previous year period, the cars were utilized for the business of running on hire and depreciation was allowed thereon. After granting the depreciation allowance for the assessment year 1996-97, the said two foreign cars formed into the concerned block of assets. But the claim of depreciation for these two cars for the impugned assessment year 1998-99 has been rejected by the assessing authority on the ground that the two foreign cars were not used for the prescribed business of running on hire during the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d used the 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. Therefore, it is simply clear that the assessee could not claim depreciation on those two foreign made cars. 5. The learned Departmental Representative submitted that the finding of the Commissioner of Income-tax (Appeals) is contradictory. The Commissioner of Income-tax (Appeals) himself has found that the two cars are foreign cars not entitled for depreciation. After coming to such a finding, the Commissioner of Income-tax (Appeals) proceeded against the same finding and granted depreciation only on the ground that the two cars have become part of the block of assets and part of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o M/s. Kent Cars P. Ltd. which is carrying on business of car leasing and they are having expertise in the field. M/s. Kent Cars P. Ltd. used the cars for running it on hire for the tourists and confirmed the same. If a car is registered as tourist taxi, it is presumed that the car is used in a business of running it on hire for tourists particularly when it is on record that the car has been given to M/s. Kent Cars P. Ltd. whose business is leasing cars for tourists. The chartered accountant referred to the following cases in his support : (1) ITO v. Asian Steel Yard ITA No. 1888/(Bom.) of 1991, dated October 1, 1991, Bombay Bench SMC] ; (2) Packwell Printers v. Asst. CIT [1996] 59 ITD 340 (Jabalpur) ; (3) Natco Exports v. Deputy CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if an asset is sold or discarded or become defunct, still it formed part of the block of assets and therefore it qualifies for depreciation allowance. We do not have quarrel on that proposition. Where an asset is added to the block of assets it becomes part of that block of assets and even if that individual asset is sold out, discarded or otherwise dispensed with, still the proportionate written down value of that particular asset always remained with the block of asset as a result of which the written down value of such discarded asset would still be entitled for depreciation. This is a natural consequence of the concept of block of assets. The block of assets even though a legal concept, its factual computation is a matter of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for depreciation. 9. An asset, not entitled for depreciation, cannot form part of a block of asset eligible for depreciation. Heterogeneous items of assets cannot form part of a homogeneous block of assets entitled for depreciation. There is no such proposition of law in section 32 of the Income-tax Act, 1961. 10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner of Income-tax (Appeals) is, therefore, vacated. The order of the Commissioner of Income-tax (Appeals) is not sustainable on this point. 12. The learned chartered accountant has further reiterated his argument that apart from the question of law as stated above, still the two cars were entitled for depreciation for the reason that in fact they were used for the purpose of giving it on hire to tourists. He explained that the cars were leased out to M/s. Kent Cars P. Ltd., who in turn hired out them to tourists. Therefore, on the basis of this fact itself, the two foreign cars were entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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