TMI Blog2014 (5) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... erred that till the time of final closure, no activities were being carried out by the assessee - minimal staff had to be kept for proper survival and security of all the assets of the company. The assessee company being a juristic entity incorporated under the Companies Act, did not cease to exist, merely on passing of the order by Government of India for closure of the company - It had to fulfill all the obligations imposed by the Companies Act till it was finally dissolved - Necessary staff had to be maintained - depreciation had to be allowed though assessee had discontinued its business – Relying upon CIT Vs. Kirti Resorts (P.) Ltd. [2011 (7) TMI 39 - HIMACHAL PRADESH HIGH COURT] - that as long as the company is in existence, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee company was earlier engaged in the business of manufacturing and marketing of fertilizers. However, since the year 2002, the company was not manufacturing any fertilizers and Government of India had ordered for closure of the company and winding up the same. The return was filed, declaring total loss of Rs.380,78,34,033/-. The AO noticed that assessee had claimed huge amount of depreciation amounting to Rs.2,51,51,000/-. He observed that in respect of those assets which comprised in the block of asset, which had finished during the year, the surplus arising on sale of assets is to be treated as short term capital gain to the assessee and to be assessed as such. 3. He further pointed out that since the assessee had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed . From this definition, it is clear that the depreciation is allowable under the Income Tax Act, 1961 subject to certain conditions firstly, that the assets as mentioned in clause (i) and (ii) are owned wholly or partly by the assessee and secondly used for business purpose. Sir, there is no dispute that assets on which depreciation has been claimed by the assessee are owned by the assessee company, the first condition and secondly used for business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant and machinery. Thus, the Ld DCIT has erred in law in interpretation of the said citation as depreciation on other assets is allowable instead of disallowed as decided in this case and similar to our case. vii. In a recent decision the Hon ble High Court of HP in the case of CIT v. Kirti Resorts (P) Ltd (2011) 60 DTR 138/243 CTR 341, has held that Assessee Company did not do any hotel business after its hotel building was washed away in floods in September, 1995. However, assessee company being a juristic entity incorporated under the Companies Act, did not cease to exist. Since it has to fulfill its obligations imposed by Companies Act till it is would up some, staff has to be maintained. Therefore, once the assessee company is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia for closure of the company. It had to fulfill all the obligations imposed by the Companies Act till it was finally dissolved. Necessary staff had to be maintained . Under such circumstances, depreciation had to be allowed though assessee had discontinued its business. We find that this issue is covered by the decision of Hon ble, H.P. High Court in the case of CIT Vs. Kirti Resorts (P.) Ltd. (2011) 60 DTR 138/243 CTR 341wherein it has been held that as long as the company is in existence, it is entitled to depreciation though it has discontinued its business. 7. In view of above discussion, we direct the AO to allow assessee s claim of depreciation. 8. In the result, assessee s appeal is allowed. Order pronounced in the open Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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