Appeals partly allowed, depreciation disallowed on SAF Plant. Outstanding expenses, salary arrears issues remanded for fresh consideration.

The appeals were partly allowed. The disallowance of depreciation on the SAF Plant was upheld. However, the issues regarding the disallowance of outstanding expenses and arrears of salary, as well as the incorrect calculation of MAT, were remanded to the assessing officer for fresh consideration upon the production of necessary evidence by the assessee.

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Issues Involved:
1. Disallowance of depreciation on SAF Plant.
2. Disallowance of outstanding expenses and arrears of salary.
3. Incorrect calculation of MAT.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on SAF Plant:
The primary issue in both appeals pertains to the disallowance of depreciation on a Submerged Arc Furnace (SAF) Plant. The facts reveal that the SAF Plant was capitalized on 1.4.1999 but had not been operational since then. The assessee claimed depreciation, which was disallowed by the assessing officer based on precedents from the Hon'ble Mumbai High Court and the Hon'ble Gujarat High Court, which emphasized that the asset must be "actually used for the purpose of business" and not merely ready for use. The assessing officer did not accept the argument that the test of 'user' should apply to the block of assets as a whole. On appeal, the CIT(A) confirmed the disallowance, leading to the current appeal.

The assessee argued that the SAF Plant was an integral part of the total plant and machinery and that depreciation should be allowed on the block of assets, even if a part of the asset was not put to use. The assessee cited various judgments to support the claim that depreciation should be allowed if the block of assets is put to use, irrespective of individual asset usage.

However, the tribunal noted that the SAF Plant was not operational since its capitalization and that various parts of the plant were removed over time, indicating no intention to use the plant. The tribunal held that the SAF Plant was not an integral part of the main plant and that the main plant could function without it. Consequently, the tribunal upheld the disallowance of depreciation, stating that the SAF Plant could not enter into the block of assets as it was never put to use.

2. Disallowance of Outstanding Expenses and Arrears of Salary:
The next issue involved the disallowance of a provision for revision of wages amounting to Rs.1,89,31,000/- and miscellaneous expenses of Rs.7,83,000/-. The assessing officer disallowed these expenses, stating that they were not actual expenditures and lacked proof of payment in subsequent years.

The tribunal reviewed the facts and noted that similar provisions had been allowed in previous years based on the tribunal's order in the case of NMDC Ltd. vs. DCIT. However, due to the non-production of evidence by the assessee, the tribunal set aside this issue to the assessing officer for fresh consideration. The assessee was directed to produce necessary evidence to support its claim, and the assessing officer was instructed to reexamine the issue in accordance with the law.

3. Incorrect Calculation of MAT:
The final issue concerned the incorrect calculation of Minimum Alternate Tax (MAT) under Section 115JB. The assessing officer added various provisions to the book profit, which the assessee contested.

The tribunal noted that the assessee failed to provide evidence before the CIT(A) to support its claim. Therefore, the tribunal set aside this issue to the assessing officer for fresh consideration. The assessing officer was directed to allow ascertained liability upon the production of requisite evidence by the assessee for the crystallization of the expenditure in the assessment year under consideration.

Conclusion:
The appeals were partly allowed. The disallowance of depreciation on the SAF Plant was upheld, while the issues concerning the disallowance of outstanding expenses and arrears of salary, as well as the incorrect calculation of MAT, were remanded to the assessing officer for fresh consideration upon the production of necessary evidence by the assessee.

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