Tribunal grants depreciation on reinstated assets, rules in favor of assessee

The Tribunal ruled in favor of the assessee, directing the AO to grant depreciation on the reinstated amount and adjust the depreciation for the relevant assessment year accordingly. The appeal challenging the enhanced disallowance of depreciation was successful, with the Tribunal emphasizing that depreciation should be allowed on assets added back to the 'block of assets' even if not utilized in the relevant year.

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Issues:
Challenge to additional disallowance of depreciation.

Analysis:
The appeal was filed against the order passed by CIT(Appeals)-20, Mumbai, regarding the quantum of assessment under section 143(3) for the assessment year 2007-08. The main challenge was against the enhanced disallowance of depreciation of Rs. 3,00,385/- by the CIT(A) compared to the initial disallowance of Rs. 53,395/- by the AO.

The assessee, engaged in cable network services and internet provision, had added an amount to the 'block of assets' due to a lower insurance claim received. The AO contended that the adjustment should have been made in the preceding year, and depreciation claimed accordingly. The difference in depreciation was calculated, leading to the disallowance of Rs. 53,395/-.

Before the CIT(A), the assessee argued that if the insurance claim was unsettled, normal depreciation should have been allowed. The CIT(A) held that since the assets were destroyed earlier and not used for business, the entire depreciation claim had to be disallowed.

During the appeal, the counsel argued that the assessee was eligible for full depreciation as the assets were part of the 'block of assets' and reinstated after the insurance claim was not settled. Relying on precedents, the counsel contended for the allowance of full depreciation.

The Tribunal found that the assets were part of the 'block of assets' and depreciation should be allowed even if not used in the relevant year. Citing relevant case law, the Tribunal directed the AO to grant depreciation on the amount added back to the block of assets and rework the depreciation for the assessment year in question. Consequently, the appeal of the assessee was allowed.

In conclusion, the Tribunal ruled in favor of the assessee, directing the AO to grant depreciation on the reinstated amount and adjust the depreciation for the relevant assessment year accordingly.

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