The Kolkata bench of Income Tax Appellate Tribunal (ITAT), has been directed to allow depreciation in respect of closed units and non-functional undertakings since depreciation is claimed on the block of assets.
The appellant, M/s. Beeyu Overseas Ltd. is in the business of cultivation and manufacturing of tea, agricultural products, and trading of goods, commodities, and agency services. During the assessment proceedings, the Assessing Officer disallowed the claim of depreciation on the plant, machinery and factory building, etc.,made by the appellant. Aggrieved, the appellant went to appeal before the CIT(A), which upheld the assessment order.
The counsel for the appellant by relying on the decision of the Coordinate Bench of ITAT, Mumbaiin the case of DCIT v. Boskalis Dreadging India Pvt. Ltd.submitted that the concept of ‘block of asset’ has been brought on the statute effective from AY 1989-90 and, therefore, individual assets lose itsidentity for depreciation and importantly, the user test is to be satisfied at the time of purchase of machinery when it is put to use for making it part of the block of asset for the first time. Further, the appellant’s counsel placed strong reliance on the decision of the Coordinate bench of ITAT, Kolkata in the case of Hindusthan Engineering & Industries Ltd. v. DCIT.
The Tribunal by relying on the provisions of Section 32 of the Act, which was amended by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 01.04.1988 observed that, once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in subsequent years on the ground that one of the assets is not used by the assessee in some of theyears. The concept of the user of assets has to apply to the block of assets as a whole instead of an individual asset. Thus, deduction of depreciation is to be allowed mandatorily in computing the profits and gains of business or profession for any previous year.
The Coram of Mr. Rajpal Yadav, Vice President, and Mr. Girish Agrawal, Accountant Member by relying on the decision of the Hindusthan Engineering & Industries Ltd. has held that “we hold that the assessee cannot be denied the benefit of depreciation claimed u/s. 32 of the Act in respect of its plant and machinery, factory building, etc., in the amount of Rs.1,34,95,087/-. Thus, considering the submissions made by the parties, material placed on record, judicial precedents referred to above, the amendment brought into section 32, especially explanation (5) to subsection (1) of section 32 of the Act, we direct the AO to allow the claim of depreciation”.
Mr. Miraj D. Shah and Mr. Biswanath Das appeared on behalf of the appellant
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
