COVID-19 lockdown delay excused, depreciation claim allowed under Section 32. Tribunal decision reversed.

The delay in filing the appeal was condoned due to the COVID-19 pandemic lockdown period, and the appeal was admitted for adjudication. The disallowance of a depreciation allowance claimed by the assessee was overturned by the Tribunal. The Tribunal emphasized the 'block of assets' concept, stating that depreciation is mandatory under section 32 of the Act, and directed the AO to allow the depreciation claim of Rs. 1,34,95,087/-. The appeal was allowed, and the AO was directed to allow the depreciation claim.

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Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of depreciation allowance claimed by the assessee.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 51 days, filed on 30.06.2020 against the order dated 04.02.2020. The delay fell within the COVID-19 pandemic lockdown period. The Hon'ble Supreme Court directed that the period from 15.03.2020 to 28.02.2022 be excluded for computing the limitation period during the pandemic. Additionally, a period of 90 days after 28.02.2022 was allowed. The respondent did not object to condoning the delay. Considering these circumstances, the delay was condoned and the appeal was admitted for adjudication.

2. Disallowance of Depreciation Allowance:
The core issue was the disallowance of a depreciation allowance of Rs. 1,34,95,087/- claimed by the assessee for the A.Y. 2010-11. The assessee's business included cultivation and manufacturing of tea, agricultural products, and trading. The AO disallowed the depreciation claim on the grounds that the plant and machinery were not in use since August 2008 after the Tea Board of India revoked the factory's registration.

Assessee's Arguments:
- The assessee had changed its business model from manufacturing to trading in tea.
- The machinery was maintained and tested to keep it ready for production or sale.
- The concept of 'block of assets' should be applied, where individual assets lose their identity for depreciation purposes once they form part of the block.
- Cited case laws to support that the business carried out need not be the same as in previous years for depreciation claims.

Judicial Precedents and Tribunal's Observations:
- The Tribunal referenced several judicial precedents, notably:
- DCIT v. Boskalis Dredging India Pvt. Ltd.: Emphasized the concept of 'block of assets' introduced from AY 1989-90, where individual assets lose their identity.
- CIT v. Sonic Biochem Extractions Pvt. Ltd.: Supported the view that once assets are part of a block, depreciation cannot be denied even if specific assets are not used in a particular year.
- CIT v. Oswal Agro Mills Ltd.: Highlighted that the user test applies to the block of assets as a whole, not individual assets.
- Nirma Credit & Capital Ltd. v. ACIT: Asserted that once assets are used for business, it is not necessary for all items in the block to be used simultaneously for depreciation eligibility.

Tribunal's Conclusion:
- The Tribunal noted that the AO's disallowance was based on the non-use of individual assets, which contradicts the 'block of assets' concept.
- The Tribunal emphasized that depreciation is mandatory under section 32 of the Act, regardless of whether the assessee claims it.
- The concept of 'block of assets' simplifies depreciation claims by aggregating assets into a block, thus eliminating the need for detailed records of individual assets.
- The Tribunal directed the AO to allow the depreciation claim of Rs. 1,34,95,087/-.

Final Judgment:
The appeal was allowed, and the AO was directed to allow the depreciation claim. The order was pronounced in the open court on 01 August 2022.

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