AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 672
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.... the Assessing Officer u/s. 143(3) r.w.s. 147 of the I.T. Act and directing the Assessing Officer to pass a fresh assessment order. 3. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 3. The only issue raised by the assessee is that the learned Pr. CIT erred in setting aside the assessment order dated 02-11-2016 framed under section 143(3) by holding the same as erroneous insofar prejudicial to the interest of Revenue. 4. The assessee is a public limited company and it was engaged in the business of manufacturing of TMT bars. Subsequently, the activities of finance and investment were also incorporated in the main object clause of the memorandum of association. The assessee for the year under consideration declared income of Rs. 1,78,03,580/- in original return filed under section 139(1) of the Act comprising of the following income: i. Business income of Rs. 36,83,692/- ii. STCG of Rs. 1,41,19,885/- and iii. LTCG of 97,295/- only. 4.1. Subsequently, the assessee filed revised return of income declaring total income of Rs. 63,27,32....
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....enue. 4.6. The assessee replied that its manufacturing activity got closed due which it sold its plant and machineries during the year and invested the entire fund into the mutual fund and deposit and further object clause of the MOA was amended i.e. from manufacturing activity to the financing activity. For financing activities it also applied to RBI to act as NBFC. Thus the observation that the assessee in not engaged in business activity is wrong. As such it is engaged in the business of financing and investing activity, carried out throughout the year which is evident from increase and decrease of investment shown as on 31st march 2013 and 2014. Accordingly the assessee claimed that the claim of depreciation on 3 new car under the block of plant and machinery is justified as these were put use in its business activities. 4.7. With regard to the adjustment of purchase of new car for Rs. 1,30,10,896/- with the sale of plant and machineries for Rs. 1,62,93,966/-, the assessee submitted that both the assets fall under the same block of 15%. Therefore the same should be treated as cumulatively not separately. But due to some oversight, in original return, both the assets were ....
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....e for depreciation @ 15% are part of the same block of assets, is not correct. As per new Appendix-I in depreciation table, both machinery and plant and motor cars are under the heading-III in Part-A "Machinery and Plant" and the first two items are: (1) Machinery and Plant other than those covered by sub-items (2), (3) and (8) below:- (2) motor cars, other than those used in a business of running them on hire, acquired or put to use on or after 01/04/1990. Thus as above, the block of 'Machinery and Plant' falls in sub block of sub-item (I) of Item-III, whereas motor cars falls in Sub item (2) in Item-III of the depreciation table. 3.3 No doubt, both the items machinery and plant and motor cars are eligible for depreciation @ 15% but they do not form part of the same block. Clearly the block" of machinery appellant consists of all the items except motor cars in sub-item No. (2) and other items in sub-item No. (3) and various items in sub-item No. (8) below sub-item (1) of the block machinery and plant. Therefore, as per express rules, motor cars do not form part of the same block as machinery and plant. 3.4 he A.O. has not examin....
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....rned Pr. CIT. The learned DR vehemently supported the order of the learned Pr. CIT. 9. We have heard the rival contentions of both the parties and perused the materials available on record. The 1st allegation of the learned Pr. CIT is that there are different block of assets for the plant and machinery is viz-a-viz. motor cars as per appendix-I under the heading III of the depreciation schedule. Accordingly the learned Pr. CIT was of the view that the motor cars purchased by the assessee cannot form part of the block of assets under the category of plant and machinery. But the assessee in the revised computation of income has shown both the assets under the same category which was also accepted by the AO. In this connection we note that admittedly there are 2 different block of assets as specified in the depreciation schedule but both the assets carry the same rate of depreciation i.e. 15%. For this purpose we find necessary to refer the definition of the block of assets as provided under sub-section (11) to section 2 of the Act which reads as under: (11) "block of assets" means a group of assets falling within a class of assets comprising-- (a) tangible assets....
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....ligible in the same rate. The Commissioner (Appeals) in his order has held that, two assets falling within two different classes can never constitute a single 'block of assets' even though they may be eligible for depreciation at the same rate. [Para 5.2] 9.3. In this regard we also find support and guidance from the order of the Hon'ble Mumbai Tribunal in case of Avin Pumps (P.) Ltd. in ITA No. 3840/Mum/2012 reported in 40 taxmann.com 123 where in similar issue the Hon'ble bench held as under: 5. We have considered the issue and examined the rival contentions. As far as legal principles are concerned, the co-ordinate Bench in the case of Artic (supra), held that the assessee would be entitled to claim set off of cost of new asset acquired in the previous year, even if the assessee was not carrying on the same business or the other business. This is also one of the contentions of the Assessing Officer that the assessee stopped business, which was also contested by the assessee. The co-ordinate Bench in the abovereferred case held as under: 'Section 50 makes special provision for the computation of capital gains in the case of depreciable ass....
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....e and if there is no business carried on by him, the deduction cannot be given. Keeping in mind the difference between the provisions relating to the computation of the business income and those relating to the computation of capital gains, as brought out by the Supreme Court in the case of CIT v. Express Newspapers Ltd. [1964] 53 ITR 250 (SC), it would be clear that the court should not allow the provisions relating to section 50(1)(iii) to be interpreted in the manner suggested by the Revenue. There is no explicit or express requirement that the new asset should be put to use in any business carried on by the assessee. The Central Board of Direct Taxes Circular No. 469, dated September 23, 1986 ([1986] 162 ITR (St.) 21) shows that the main object of introducing the block of assets concept was only to reduce time and effort spent in detailed record maintenance. While giving effect to this object, there could have been no justification or warrant for prescribing a condition that the new asset, in addition to being an asset in respect of which the same rate of depreciation is prescribed as in the case of the other assets within the class, should also be used in a business c....
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....assessee. The only requirement is that in respect of assets which form the block of assets, same percentage of depreciation should be prescribed. The word 'same percentage' shows that the block of assets refers to same rate of depreciation which is prescribed under the Rules. All assets, which may be of different types, but in respect of which same percentage of depreciation is prescribed, are to be treated and form part of the block of assets. [Para 13] Appendix-I under rule 5 of the Income-tax Rules, 1962 prescribes and states the table of rates at which depreciation is admissible and is divided into different parts and sub-headings. Rates of depreciation have been prescribed. Assets of different types which have been prescribed same rate of depreciation have been clubbed and put together. Appendix does not stipulate and provide that each unit or division of assessee has to be separately accounted for and shown or forms a separate block of assets. The table, in fact, does not postulate and require any such division or bifurcation. The bifurcation is made between tangible assets and intangible assets and then under various sub-headings as per the rate of depreciat....
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....essee got inserted new objects in the main object clause of memorandum of association by passing special resolution dated 13th November 2013. These object clause are appearing on page 108 of the paper book and the relevant extract reproduced as under: 7. To buy, sell or deal In all types of commodities traded on the commodities arid/or spot Exchange(s) India or abroad in cash or derivatives segments including forward contracts and to carry on business of investing and/or trading in commodities through dealer, merchants, agents and the commodities Exchange(s) and/or Spot Exchange(s) including taking and/or giving physical delivery of commodities, articles, products. 8. To invest, acquire, subscribe, purchase, hold, sell, divest or otherwise deal in securities, financial instruments, financial products, units, bonds, commercial papers, acknowledgments, deposits, notes, obligations, warrants, government securities loans, loan certificates, all kinds of derivatives including interest derivatives, futures, forwards, options, calls, swaps, rights or interest in securities, foreign currencies, carbon credits, financial securities and any other securities issued by any en....
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....nder: 3. Addition to Fixed Assets (Sr. No. 5) The statement giving details of addition made to fixed assets during the year with copies of invoices is as per enclosed Annexure-3. 4. Deletion of Fixed Assets (Sr. No. 6) The statement giving particulars of deletion made to fixed assets during the year under consideration along with working of profit/loss incurred on such sale of fixed assets and sample bill copies is as per enclosed Annexure-4. As regards to gain/loss we submit that sale proceeds realized from sale of fixed assets was reduced from block of assets and consequential gain/loss was offered to tax under section 50C of the Act which is verifiable from computation of total income attached herewith vide Annexure-5. 5. Details of Claim u/s. 32(1)(iia) of Act (Sr. No. 7) We have not claimed any additional depreciation during the year and accordingly details called for are not applicable. 9.11. Thus from the above, it is transpired that the AO during the assessment proceedings have carried out necessary verification after applying his mind. Thereafter he has taken a conscious decision by accepting the income declared by t....