TMI Blog2003 (5) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961.” Shri V. H. Patil, learned counsel for the assessee neatly identified the following two issues emanating out of the aforesaid four grounds, to which the learned Departmental Representative also agreed. (i) Whether the single asset can itself form a block of asset within the meaning of “block of assets” as per section 2(11) of the Income-tax Act, 1961 ? (ii) Whether, on the facts and in the circumstances of the case, the provision of section 50 are applicable in respect of premises sold by the assessee during the previous year relevant to the assessment year 1988-89 when the assessee has ceased to carry on the business from the assessment year 198586 ? We shall first take up issue No. 1, i.e., whether the single asset can itself form a block of asset within the meaning of “block of assets” as per section 2(11) of the Income-tax Act, 1961. The facts of the case are that prior to the assessment year 1985-86, the assessee trust was carrying on the business of manufacturing of Fiat car accessories. From the assessment year 1985-86, the assessee trust ceased to carry on its business but continued to remain in possession of the assets. One of the assets owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the block of assets. In view of the above, we hold that the single asset can itself form a block of asset within the meaning of section 2(11) of the Income-tax Act, 1961. With regard to the second question, it is vehemently contended by learned counsel that the block of asset presupposes the existence of the business. The depreciation is allowable only when the assessee is carrying on the business. When there is no business at the relevant time, there is no question of claim of any depreciation and similarly no question of forming part of the block of assets. The whole concept of block of assets is relevant for the purpose of allowing depreciation. He further submitted that as per section 2(11), “block of assets” means “group of assets in respect of which some percentage of depreciation is prescribed”. That percentage of depreciation is prescribed in rule 5 of the Income-tax Rules. As per rule 5, depreciation is to be calculated on WDV of such block of assets as are used for the purpose of business. Thus, unless the asset is used for the purpose of business, it does not form part of block of asset. He further submitted that the concept of block of assets came for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following modifications : (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers ; (ii) the written down value of the block of assets at the beginning of the previous year ; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year ; such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets ; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed for the year under consideration. If the depreciation is allowed in any of the years either under the Income-tax Act, 1961, or under the Indian Income-tax Act, 1922, section 50 would be applicable. Section 50 would be applicable if the depreciation is allowed on that asset even under the Indian Income-tax Act, 1922, the above provision clearly establishes the intention of the Legislature that the user of the asset during the year under consideration is not necessary. We find that the Income-tax Appellate Tribunal, Mumbai Bench, has considered the similar issue in the case of Artic [1999] 68 ITD 462. While considering section 2(11), the Income-tax Appellate Tribunal held as under (page 471) : “Section 2(11) of the Income-tax Act defines ‘block of assets’ as meaning a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed. The definition does not speak of depreciation having been allowed in the assessments in respect of any asset falling within the block of assets but refers only to the depreciation rates being prescribed in the Rules.” While dealing with section 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e new building purchased should be one in respect of which the same rate of depreciation, as is prescribed in respect of the other buildings, has been prescribed by the rules. If the assessee carries on a business, in that case he would also be eligible for an allowance on account of depreciation at that rate. In the case of an assessee who does not carry on a business, the result would be that he would not be entitled to any allowance on account of depreciation in respect of the asset. If at a future date he decides to commence a business, he would be entitled to the depreciation allowance in respect of the new asset, provided he satisfies the authorities that the new asset was used in that business.” We entirely agree with the above view expressed by the Income-tax Appellate Tribunal, Mumbai Bench. In the case of Oceanic Investment Ltd. [1997] 57 TTJ 549 (Mum) also, the Income-tax Appellate Tribunal Mumbai Bench have taken the view that for the purpose of section 50, it is not necessary that the newly acquired asset must be used for the purpose of business during the year under consideration. Learned counsel for the assessee has heavily relied upon the decision of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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