AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 733
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....able. 3. Ld. CIT(A) erred in law and on facts holding ground challenging action of AO not deducting unabsorbed brought forward depreciation and ordinary business loss as infructuous in absence of business activity during the year. 4. Levy of interest u/s. 234AB C & D of the Act is not justified. 5. Initiation of penalty proceedings u/s. 271 (1)(c) of the Act is not justified." 3. The brief facts of the case are the assessee is engaged in the business of producing energy. During the course of the assessment proceedings, Ld. Assessing Officer observed that the assessee had not generated any revenue for the year from business operations. Further, the assessee had claimed shifting and dismantling expenditure for Rs. 14,97,804/- and the assessee had shifted its plants and machinery in the year under consideration. Therefore, Ld. Assessing Officer held that it is evident that during the year under consideration, there was no business activity and assessee had not used its plants and machinery for business purposes. Hence, Ld. Assessing Officer disallowed certain expenditure and depreciation of Rs. 1,71,24,757/- on plant and machinery claimed by the assessee during the year under c....
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....t on these case laws is misplaced since in the present case it is not a case of the Plant being ready for use' since in the present case as per appellant's own submission during the year under consideration the appellant company was under the process of winding-up. During the appeal proceedings, the appellant submitted a letter dated 17/01/2017 from office of the Registrar of Companies, Ministry of Corporate Affairs to the effect that the appellant company is dissolved. Thus effectively, no business has been carried out by the appellant company during the year under consideration and in the subsequent years till it was dissolved on 17/01/2017. Therefore, there was no question of depreciation being allowed on the ground of Plant and Machinery being 'ready to use'. In view of this discussion, it is held that the AO was justified in disallowing the addition of Rs. 1,71,24,757/. Accordingly, this ground of appeal is rejected." 5. Before us, Ld. Counsel for the assessee invited our attention to Pages 3 and 34 of Paper-Book-II to assert that during the year, the assessee was in process of shifting its power plant from Sanad Site to Panoli District, Ankleshwar Site for ca....
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....s the assessee has not been able to demonstrate use of plant and machinery throughout the year, depreciation cannot be allowed. Further, Ld. Departmental Representative submitted that the assessee was in the process of winding up of business, which it eventually did, therefore no case is made for allowability of depreciation on assets never meant to be used. 7. We have heard the rival contentions and perusal the material on record. The issue for consideration before us are two-fold: First, whether depreciation amounting to 1,71,24,757/- can be allowed to the assessee, when admittedly, the plant and machinery was not put to use during the year under consideration, since assessee was in process of shifting the unit to a new location. Secondly, whether the assessee can be allowed set-off of unabsorbed brought forward depreciation and business loss in absence of business activity during the year. 7.1. We shall first deal with the first issue mentioned above. 7.2. In the case of Nirma Credit & Capital Ltd. v. ACIT [2017] 82 taxmann.com 109 (Gujarat), the facts were that the assessee company is engaged in the business of manufacture of detergents. During the year under consideration, ....
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....of stay from Court it could not run factory in year under consideration, depreciation could not be denied on account of closure of business. 7.4. In the case of Swati Synthetics Ltd. v ITO [2010] 38 SOT 208 (MUM.), the facts were that assessee had two divisions, one at Dombivli and the other at Surat. The division at Surat was closed since two/three years. The assessee claimed depreciation on the assets of the said Surat division which was rejected by the AO and the CIT(A) on the ground that the assets were not "used" and depreciation could not be allowed. On appeal by the assessee, ITAT held allowing the appeal in Gulati Saree Centre 71 ITD 73 (Chd.) (SB), that: (i) even after introduction of the concept of block of assets, the identity of individual assets was not lost & the AO could restrict depreciation u/s. 38(2) having regard to the user of the assets. However, s. 38 (2) applies only to a case when the asset is not exclusively used for business purposes but is used for non business purposes as well. S. 38 (2) does not apply to an asset which is neither used for business purposes nor for non business purposes but remains in the block of assets; (ii) The concept of allowin....
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....and, in subsequent years when use of block of assets is to be examined, existence of individual asset in block of assets itself amounts to use for purpose of business. 7.6. In Hindustan Engineering & Industries Ltd. v. DCIT [2018] 90 taxmann.com 230 (Kolkata - Trib.), ITAT held that where a sick company amalgamated with assessee-company, by operation of law assets of sick company fell in 'Block of assets' of assessee-company and thus even through such assets were non-functional, yet they could not be segregated and depreciation had to be allowed in respect of same. 7.7. In DCIT v. Boskalis Dredging India (P.) Ltd. [2012] 23 taxmann.com 4 (Mum.) ITAT held that where asset purchased by assessee has been used for purpose of its business and same has been included in 'block of asset', depreciation is to be allowed thereon even if same could not be used during relevant assessment year due to some reasons beyond control of assessee; 7.8. In CIT v. Chennai Petroleum Corpn. Ltd. [2013] 37 taxmann.com 332 (Madras), Madras High Court held that where assessee claimed depreciation on plant and Assessing Officer declined depreciation on plea that plant had never been put to u....
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....y during the year. 9.1. In the case of CIT v Deepak Textile Industries Ltd. [1987] 35 Taxman 92 (Gujarat), the Gujarat High Court held that unabsorbed depreciation can be carried forward and set off by assessee even though business of textile mills to which such unabsorbed depreciation related had been discontinued by assessee. The Gujarat High Court made the following observations while passing the order: "Section 32(1) requires the existence of the following three facts for deduction of current year's current depreciation, namely : (1) ownership of machinery, (2) user of machinery, and (3) user of machinery for the purpose of business. All the aforesaid three facts must co-exist in the current year. It is also clear from the perusal of section 32(2) that said sub-section (2) is only subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73. It is settled law that in interpreting or creating legal fiction, the Court has to ascertain as to for what purpose the legal fiction is created and after ascertaining this, the Court has to assume all those facts and the consequences which are incidental or inevitable corollaries in giving effect to t....