TMI Blog2006 (1) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... pose 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax (Appeals) found that the depreciation was already granted for those two cars in the assessment year 1996-97 and, therefore, the two cars became part of the block of assets. As they have become block of assets in the light of section 32(1)(ii), depreciation has to be allowed on the opening value of block of assets and, therefore, by virtue of this unique situation, the assessee was entitled for depreciation on the two foreign cars. On this ground, the appeal of the assessee was allowed. 3. It is against the above relief the Revenue has preferred this appeal before us. 4. Shri K. C. P. Patnaik, the learned Departmental Representative appearing for the Revenue, contended that there is no dispute regarding the fact that the two cars are foreign made cars. The law relating to depreciation clearly provides that foreign made cars are not entitled for depreciation. The only exception is that the cars should be deployed in the business of running on hire. In the present case, even though the assessee had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [2003] 86 ITD 445 (Hyd) ; (4) South Eastern Coalfields Ltd. v. Joint CIT [2003] 260 ITR (AT) 1 (Nagpur) ; and (5) Deputy CIT v. Udaipur Distillery Co. Ltd. [2002] 74 TTJ 193 (Jodhpur). 7. We heard both sides in detail. Regarding the factual aspect of the case that the two foreign made cars were leased out to M/s. Kent Cars P. Ltd. and ultimately used for running it on hire for tourists has not been adjudicated by the Commissioner of Income-tax (Appeals) in his order. The Commissioner of Income-tax (Appeals) has allowed the appeal of the assessee on the legal ground that once an asset formed part of a particular block of assets, then the asset loses its identity and formed part of the block of assets and thereafter automatically qualifies for depreciation as forming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as to how the depreciation has to be computed. It is at this secondary stage that the old concept of individual asset is replaced by the new concept of block of assets. But still, the basic compulsory and primary condition that an asset must be entitled for depreciation remains throughout the history of depreciation allowance when it was computed on individual asset basis or computed on block of assets basis. Even under the concept of a block of assets, it is very essential that an asset going to be included in the said block of asset is otherwise entitled 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 allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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