Court Upholds Decision on Asset Verification Before Depreciation Claim

The Court upheld the Tribunal's decision to remand the matter for verification of asset use before adding to block assets for the assessment years 2011-12 and 2012-13. The Court dismissed the appeal, ruling that asset use must be established before claiming depreciation under the Income Tax Act, emphasizing the need to ascertain if assets were used for business activity to claim depreciation, despite no income earned from asset use.

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Issues:
Challenge to remand order by Tribunal for fresh consideration by Commissioner of Income Tax (Appeals) regarding depreciation claim.

Analysis:
The appellant, a Trust engaged in charitable activities, filed returns for assessment years 2011-12 and 2012-13 declaring nil income. The Assessing Officer disallowed depreciation claim as no income was earned from asset use. The Commissioner of Income Tax (Appeals) remanded the matter back for fresh consideration, allowing the appeal. The Revenue appealed to the Tribunal, which set aside the Commissioner's order, directing a fresh decision on asset use for business activity. The Tribunal upheld that if no income was earned from asset use, depreciation could be claimed. However, it remitted the matter back to ascertain if assets were used for business activity. The appellant challenged this remand order, citing a Delhi High Court judgment to argue against the need for proof of asset use once included in the block assets.

The substantial questions of law raised in the appeal questioned the necessity of asset use for claiming depreciation under the Income Tax Act and the validity of setting aside the Commissioner's order without disputing asset use. The Revenue contended that asset use must be established before inclusion in block assets, citing a Supreme Court judgment. The Tribunal upheld the Commissioner's order on depreciation claim but remanded for verification of asset use, leading to the present appeal. The Court considered both parties' contentions, upholding the Tribunal's decision to remand for verifying asset use before adding to block assets. The Court clarified that the inquiry should be limited to the assessment years 2011-12 and 2012-13. Consequently, the substantial questions of law were answered against the appellant, resulting in the dismissal of the appeal.

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