Tribunal upholds disallowance of depreciation on plant & machinery for trading activity The Tribunal dismissed the appeal filed by the assessee, upholding the decision of the Ld. Commissioner of Income Tax (Appeals) to disallow depreciation ...
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Tribunal upholds disallowance of depreciation on plant & machinery for trading activity
The Tribunal dismissed the appeal filed by the assessee, upholding the decision of the Ld. Commissioner of Income Tax (Appeals) to disallow depreciation on plant and machinery. The delay in filing the appeal was condoned due to financial constraints and employee turnover, but the Tribunal found no merit in the claim for depreciation as the assessee had not resumed manufacturing activities despite claiming depreciation on plant and machinery. The Tribunal concluded that trading activity did not qualify as manufacturing activity, affirming the disallowance of the depreciation claim.
Issues involved: Delay in filing appeal due to financial constraints and turnover of employees; Disallowance of depreciation on plant and machinery for lack of manufacturing or trading activities.
Delay in filing appeal: The appeal was filed with a delay of 373 days due to financial constraints and turnover of employees. The delay was attributed to the failure of Mr. Teekaram, appointed to handle tax matters, to inform the management about the order. The Tribunal condoned the delay, considering it a reasonable cause in the interest of justice.
Disallowance of depreciation: The Assessing Officer disallowed depreciation of Rs. 37,95,956 on plant and machinery, stating that no manufacturing or trading activities were carried out by the assessee. The company had changed its name and ceased manufacturing activity due to business reasons. The major portion of assets had been sold, indicating no intention to continue the business temporarily.
Decision of Ld. Commissioner of Income Tax (Appeals): The Commissioner upheld the disallowance of depreciation, noting that the appellant had sold a significant portion of fixed assets and had no intention to temporarily stop business activities. The Commissioner found no merit in the claim for depreciation on plant and machinery.
Tribunal's decision: The Tribunal considered whether the stoppage of manufacturing activity was temporary. It observed that the assessee had not initiated manufacturing business despite claiming depreciation on plant and machinery. The Tribunal found no basis to support the claim, as trading activity did not equate to manufacturing activity. Consequently, the Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) to disallow the depreciation claim.
Conclusion: The appeal filed by the assessee was dismissed, and the decision of the Ld. Commissioner of Income Tax (Appeals) to disallow depreciation on plant and machinery was upheld by the Tribunal.
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