TaxTMI 
TaxTMI 
2022 (9) TMI 333
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.... or before 10.05.2020 which has been filed on 30.06.2020. The period of delay of 51 days falls within the lock-down owing to Covid-19 pandemic for which the Hon'ble Supreme Court has directed that the period from 15.03.2020 to 28.02.2022 is to be excluded for the purpose of computing the limitation period during the COVID-19 pandemic. Further, a period of 90 days is allowed after 28.02.2022 vide same order. When the matter was confronted to Ld. Sr. DR, he did not raise any objection for condonation of the delay in filing the appeal. Considering the facts and circumstances of the case, we condone the delay in filing the appeal which pertains to the pandemic of COVID-19 and thus admit it for adjudication. 3. The solitary ground of appeal taken by the assessee relates to disallowance of depreciation allowance claimed by the assessee of Rs.1,34,95,087/- (erroneously printed as Rs.1,34,91,087/- in the assessment order). 4. Brief facts as culled out from the records are that assessee filed its return of income on 24.09.2010 reporting a loss of Rs.1,49,35,873/-. Assessee is in the business of cultivation and manufacturing of tea, agricultural products and trading of goods, commoditi....
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....Act, bifurcation of block of asset is not permitted under the Act. (viii) Depreciation cannot be disallowed for the entire block, bifurcating one item from the block on the ground that it is ineligible asset for claim of depreciation." 5. In the course of the first appellate stage, assessee also placed reliance on the decision of Coordinate Bench of ITAT, Mumbai in the case of DCIT v. Boskalis Dreadging India Pvt. Ltd. 53 SOT 17 (Mum) to assert that concept of 'block of asset' has been brought on the statute effective from AY 1989-90 and, therefore, individual assets looses its identity for the purpose of depreciation and importantly, the user test is to be satisfied at the time of purchase of machinery when it is put to use for making it part of block of asset for the first time. Reliance was also placed on the decision of Hon'ble High Court of Bombay in the case of CIT Vs. Sonic Biochem Extractions Pvt. Ltd. in ITA No. 2088 of 2013 for the same contention. While deciding the appeal, ld. CIT(A) found favour with the assessee on the condition of ownership of assets by the assessee. However, on the condition regarding the use of assets for the purpose of business, he con....
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....hat it was not put to use. With the aforesaid amendment, the depreciation is now to be allowed on the written down value of the "block of assets" at such percentage as may be prescribed. With this amendment, individual assets have lost their identity and concept of "block of assets" has been introduced, which is relevant for calculating the depreciation. We take note of the Circular issued by the Revenue itself explaining the purpose behind the amended provision. The same is contained in CBDT Circular No.469 dated 23.09.1986, wherein the rationale behind the aforesaid amendment is described as under: "6.3 As mentioned by the Economic Administration Reform Commission (report No.12, Para 20),the existing system in this regard requires the calculation of depreciation in respect of each capital assets separately and not in respect of block of assets. This requires elaborate book-keeping and the process of checking by the Assessing Officer is time consuming. The greater differentiation in rates, according to the date of purchase, the type of asset, the intensity if use, etc., the more disaggregated has to be the record-keeping. Moreover, the practice of granting the terminal al....
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....accept the submission of the Revenue "that for allowing the depreciation, user of each and every asset is essential even when a particular asset forms part of "block of assets" Repelling this argument of Revenue, their Lordship in his own words held " Acceptance of this contention would mean that the assessee is to be directed to maintain the details of each asset separately and that would frustrate the very purpose for which the amendment was brought about. It is also essential to point out that the Revenue is not put to any loss by adopting such method and allowing depreciation on a particular assets forming part of the "block of assets" even when that particular asset is not used in the relevant assessment year. Whenever such an asset is sold, it would result in short term capital gain, which would be exigible to tax and for this reason, we say that there is not loss to Revenue either." 21 It would be worthwhile to discuss the facts in CIT Vs. Oswal Agro Mills Ltd 341 ITR 467 (Del) in brief:- "For the relevant assessment year the assessee claimed depreciation on its various assets which included the claim of depreciation in respect of a closed unit at Bhopal. T....
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....d the law to provide for allowing of the depreciation on the entire block of assets instead of each individual asset. The block of assets has also been defined to include the group of assets falling within the same class of assets [Para 31]. Another significant and contemporaneous development, which needs to be noticed, is that the Legislature has also deleted the provision for allowing terminal depreciation in respect of each asset, which was previously allowable under section 32(1)(iii) and also taxing of balancing charge under section 41(2) in he year of sale. Instead of these two provisions, now whatever is the sale proceed of sale of any depreciable asset, it has to be reduced from the block of assets. This amendment was made because now the assesses are not required to maintain particulars of each asset separately and in the absence of of such particular, it cannot be ascertained whether on sale of any asset, there is any profit liable to be taxed under section 41(2) or terminal losses allowable under section 32(1)(iii).This amendment also strengthens the claim that now only detail for 'block of assets' has to be maintained and not separately for each asset (para 32)....
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....all the assets in the block at the beginning of the previous year along with additions made to the assets in the subject Assessment Year depreciation is allowable. The individual asset looses its identity for purposes of depreciation and the user test is to be satisfied at the time the purchased Machinery becomes a part of the block of assets for the first time. In the circumstances the respondent's appeal was allowed and the disallowance of depreciation was deleted. d. Mrs. Bharucha, learned Counsel for the revenue fairly states that the issue arising herein is identical to the issue which arose before the Tribunal in Boskalis Dredging India (supra) where also the dredger concerned was a part of the block of assets and not put to use. On instructions, she further states that the Revenue has accepted the decision of the Tribunal in Boskalis Dredging India (supra) which the impugned order has merely followed. No distinguishing feature in the present facts has been pointed out which would warrant taking a different view. Besides the Tribunal in its order in Boskalis Dredging India (supra) placed reliance upon the decision of this Court rendered in an appeal filed by the Reve....
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....nds allowed." 7.2 Ld. Counsel also placed reliance on the decision of Coordinate Bench of ITAT, Delhi in the case of Pawan Hans Helicopters Ltd. v. DCIT in ITA No. 419/Del/1994 dated 14.07.2021 wherein also the similar issue was addressed and held in favour of the assessee. 8. Per contra, Ld. Sr. DR placed strong reliance on the decision of Ld. CIT(A) and referred to the judicial precedents dealt in the same. 9. We have heard the rival contentions, perused the material available on record and gone through the judicial precedents on the subject matter placed before us. Before adverting on the issue, let us apprise ourselves with the provisions of Section 32 of the Act, which were amended by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 01.04.1988. As per the amended section 32 of the Act, deduction is to be allowed - "in the case of any block of assets, such percentage on the written down value thereof as may be prescribed". Thus, with the amendment, the depreciation is allowed on block of assets. The definition of 'block of assets' is defined by section 2(11) of the Act according to which block of assets means, group of assets falling within a c....
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....s to apply on the block of assets as a whole instead of an individual asset. 11. We further note that an explanation was inserted in sub-section (1) of section 32 of the Act by Finance Act, 2001 w.e.f. 01.04.2002 which is reproduced as under: "Explanation 5. - for the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income." 11.1 The notes to clauses as mentioned in Finance Bill, 2001 in respect of amendment of section 32 of the Act for the insertion of explanation (5) states that a new explanation (5) in clause (ii) explanation (1) of section 32 of the Act is inserted so as to clarify that the provisions of sub-section (1) of section 32 of the Act shall apply whether or not the assessee has claimed the deduction of depreciation in computing his total income. It also states that this amendment will take effect from 1st April, 2002 and will, accordingly, apply in relation to the AY 2002-03 and subsequent years. 11.2 The explanatory memorandum to the Finance Bill, 2001 relating to this amendment is reproduced as under: ....
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....ed above. In the Director's report, assessee had also submitted that it was open for the assessee to lease out the plant and machinery. All these reflect the intention of the assessee which are in the nature of passive use of the assets on which depreciation has been claimed. 12.3 We also note that the case laws on which ld. CIT(A) has placed reliance do not cover the case of the assessee. Ld. CIT(A) placed reliance on the decision of Hon'ble Jurisdiction High Court of Calcutta in the case of CIT v. Oriental Coal Co. Ltd. (1994) 206 ITR 682 (Cal), for which we note that it deals with AYs 1983-84 and 1984-85 which are prior to the amendment made to section 32 of the Act as referred above wherein the concept of 'block of assets' was not brought on the statute. Hence, the said decision cannot be applied in the present case. Also he placed reliance on the decision of Hon'ble High Court of Kerala in the case of CIT v. Punalur Paper Mills (2019) 111 taxman.com 50 from which we note that the Hon'ble High Court has stated that "passive use cannot be extended for time immemorial nor for 24 years in which assessee's unit had remained closed." Thus, the period of time involved was of 24 ye....