Tribunal Upholds Depreciation on Plant & Machinery, Disallows Pipeline Depreciation

The Tribunal upheld the CIT(A)'s decision to allow depreciation on plant and machinery, recognizing passive use, and maintained the disallowance of depreciation on the pipeline due to an ongoing dispute. The Tribunal dismissed both the Revenue's and the appellant's appeals, affirming the lower court's rulings.

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Issues Involved:
1. Whether the claim of depreciation on plant and machinery for the assessment year 2009-10 is allowable despite the assets not being actively used during the year.
2. Whether the disallowance of depreciation on the pipeline, which has been under dispute since the assessment year 2001-02, should be upheld.

Issue-wise Detailed Analysis:

1. Allowability of Depreciation on Plant and Machinery:

The primary issue revolves around the appellant's claim for depreciation on plant and machinery amounting to Rs. 7,72,10,093/-. The Assessing Officer (AO) denied this claim on the grounds that the company's operational activities were abandoned during the year, and the assets were not actively used. The AO relied on the interpretation of the term "used" in Section 32 of the Income Tax Act, 1961, arguing that depreciation is allowable only if the assets are actively used for business or profession, citing several judicial precedents to support this view.

The CIT(A) partly allowed the appeal, permitting depreciation on plant and machinery except for the pipeline, which was under dispute. The CIT(A) observed that depreciation had been allowed in preceding and succeeding years, and the mere lack of contract work did not justify disallowing depreciation.

Upon appeal, the Tribunal noted that the business was not closed but temporarily inactive. The Tribunal emphasized that the assets were ready for use and had been used in previous years, thus qualifying for passive use. The Tribunal referenced various judicial precedents, including CIT vs. Refrigeration & Allied Industries Ltd., where it was held that assets kept ready for use could be considered as used for depreciation purposes. The Tribunal concluded that the CIT(A) correctly allowed the claim of depreciation on plant and machinery, dismissing the Revenue's appeal.

2. Disallowance of Depreciation on Pipeline:

The second issue pertains to the disallowance of depreciation on the pipeline, which has been a point of contention since the assessment year 2001-02. The CIT(A) did not allow depreciation on the pipeline due to the ongoing dispute. The Tribunal referenced its earlier decision in the appellant's own case for the assessment years 2005-06, 2006-07, and 2007-08, where it upheld the disallowance of depreciation on the pipeline based on the CIT(A)'s orders for earlier years.

The Tribunal noted that the issue was squarely covered against the appellant by the decision of the Co-ordinate Bench in the appellant's own case, where it was held that depreciation on the pipeline was not allowable. Consequently, the Tribunal declined to interfere with the CIT(A)'s order and upheld the disallowance of depreciation on the pipeline, dismissing the appellant's appeal on this ground.

Conclusion:

In conclusion, the Tribunal dismissed both the Revenue's appeal and the appellant's appeal. The Tribunal upheld the CIT(A)'s decision to allow depreciation on plant and machinery, recognizing the concept of passive use, while also maintaining the disallowance of depreciation on the pipeline due to the ongoing dispute. The Tribunal's decision was pronounced in the open court on 21st July 2016.

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