TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 737
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....hich, the AR of the assessee filed the required information. 3.1. During the course of assessment proceedings, the Assessing Officer observed that, there is no business activity from the year 2010 onwards and since there was no business activity carried out during the year, it was proposed to disallow the depreciation of Rs. 6,13,14,399/- claimed by the assessee company. In this regard, the assessee submitted that it had actually started using the plant and machinery and other assets for its business from A.Y. 2009-10. However, due to adverse business condition it became sick and suspended operations temporarily and during the year under consideration it succeeded in raising funds and started refurbishing the plant and machinery. The submissions of the assessee company were considered by the Assessing Officer. As per Sec. 32(1), the depreciation is allowed only if the asset is used for the purpose of business or profession at least for sometime during the year previous year. Even use during the part of the year would be sufficient to enable the assessee claim depreciation for the whole year. In the present case, the Assessing Officer observed that the assessee company became sick ....
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....n in AY 2013-14, he could have allowed in the impugned AY by taking into consideration the judicial consistency. We observe from the paper books filed by the assessee that the company has stopped its production/trading activities since 2010 but still in existence. Since in the eyes of law, the company is an artificial jurisdictional entity, it has to maintain its existence unless it gets dissolved under the companies Act. The Fixed Assets are still lying in the control of the assessee and we observe from the paper book that the company is trying to revive its business and gone for one time settlement, it shows that the business was temporarily shut down due to heavy losses. The case of the assessee was assessed u/s. 143(3) for the A.Y. 2013-14 vide order dated 15.02.2016 and the same facts were existence in the impugned AY, which has been accepted by the Assessing officer. In our considered opinion, the use of individual asset for the purpose of business may be examined only in the first year when the asset was purchased and put to use but not in the subsequent years, when use of block of assets is to be examined, existence of individual asset in block of assets itself amounts to u....
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.... out that though the annual capacity for manufacture of printed circuit boards was 54,000 sq.mts, the assessee could manufacture only 568 sq.mts and 5409 sq.mts in the earlier years. c) The reason for the assessee becoming sick was the cancellation of orders from international customers subsequent to the terror attacks in USA, and the assessee's inability to accept orders for domestic markets because it was a hundred per cent export oriented unit and also insufficient working capital. d) Although there was no production up to 31.3.2007, in the application for admission of its case before the BIFR the assessee had stated that since the second quarter of 2002, the world business scenario has improved and the company has started receiving substantial orders. From these facts the CIT(Appeals) concluded that though the assessee had an intention to restart the manufacturing operations, no such operations were actually undertaken and in that view of the matter it cannot be said that the plant and machinery or other assets were used for the purpose of the assessee's business. In support of his view the CIT(Appeals) referred to several judgments of the Calcutta, Madhya Pradesh....
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....allowance and staff welfare expenses as also the repairs and maintenance and expenses on consumable stores. This, according to the Tribunal, also supported the assessee's plea that it was making all efforts to revive the business and was keeping the plant and machinery and other assets ready for use. Moreover, the revenue had not filed any appeal to the Tribunal questioning the decision of the CIT (Appeals) allowing deduction on account of various expenses such as salary and allowance, staff welfare, repairs and maintenance etc. The Tribunal has also dealt with the argument of the department that since the assessee was claiming write off of the stock of raw material, work-in- progress and finished goods it could not be said that the assessee was keeping its plant and machinery and other assets ready for use. According to the Tribunal the write off of these stocks was claimed for the simple reason that after lapse of considerable time, these stocks became useless and unfit for any manufacturing activity and write off of such stocks did not mean that the assessee had no intention to revive the business. 8. In the aforesaid view of the matter, the Tribunal held that the plant an....
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....ave not been challenged by the revenue. The other question as to whether the plant and machinery should have been actually put to use in order to be entitled to depreciation under Section 32 and that mere passive use, in the sense that they were kept ready for use as and when the business was revived, would be sufficient compliance with Section 32 should not detain us since it has already been decided in the affirmative by at least three judgments of this Court. 9. The Tribunal has referred to the judgments in Capital Bus Service (supra), CIT Vs. Refrigeration and Allied Industries Ltd. (supra) & CIT Vs. Panacea Biotech Ltd. (supra) and has applied the ratio laid down therein to the facts of the present case. The ratio in brief is that it is not necessary that the plant and machinery owned by the assessee should be actually put to use in the relevant accounting year to justify the claim of depreciation and that even if the plant and machinery or other asset is kept ready for use in the assessee's business, the assessee would be entitled to depreciation. The only condition is that the business should not have been closed down once for all and that the assessee should demonstra....