TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 986
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....f manufacture and sale of cement. Ld. AO observed that out of the 10 plants only three plants are in operation and the rest are not in operation for the last 9 years. Accordingly, the company was show caused as to why depreciation on plants which have been shut down be not disallowed like previous year. Ld. AO observed that in the order of BIFR dated 05.12.2005 it has been categorically mentioned that the 2nd stage to be implemented during 2006-07 and 2007-08 is proposed to be funded out of the sale proceeds of the seven non-operating units. He thus, observed that units are completely closed down and the manufacturing activities have not been temporarily suspended. Ld. AO observed that the asset in respect of which depreciation is claimed must have been used for the purpose of business of the production and if it is found that during the year the machinery cannot be said to have been used for the purpose of the business of assessee then depreciation cannot be allowed. He relied judgment of Hon'ble Calcutta High Court in the case of CIT vs. Union Carbide India Ltd. 124 taxman 859. Ld. AO also took into consideration the fact that in regard to previous year additions although Ld. CIT....
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....inly working " 6. In the considered view of the Court, there has been no occasion for the ITAT to seriously consider whether, for the A. Ys in question, there were any working units of the assessee and if, in fact, the entire block of assets in respect of which depreciation was claimed actually put to use. The ITAT also did not consider that there is no longer a requirement for the COD to grant permission to the Revenue to file an appeal. 7. The Court accordingly sets aside the impugned order of the ITAT on the issue of depreciation and remands the appeals to this extent to the ITAT for-a fresh decision in accordance with law. " 4. Accordingly, the assessee is in appeal and the grounds for A.Y. 2011- 12 as common with AY 2012-13, except the amounts involved, are reproduced below: "1. The Hon'ble Commissioner of Income Tax (Appeals) - II, New Delhi has erred on facts of the case and in Law while affirming the Order of the Ld. Assessing Officer on disallowance of depreciation u/s 32 of the Income Tax Act'1961 (Herein after referred as "The Act".) 2. The Hon'ble Commissioner of Income Tax (Appeals) - II, New Delhi, while affirming the order of the Ld. Assessing Officer on dis....
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....nery were fully charged off and only the generator set and office equipments like computers etc. were used for day to day office operation and depreciation was charged on those items only, as the plants were not completely closed. On the other hand, the other contention of the assessee has also been that the depreciation has to be allowed on the entire block of assets as defined u/s. 2(11) of the IT Act and use of individual assets of each unit cannot be considered for the purpose of depreciation on entire block. A perusal of the assessment order reveals that the AO has not given the details of assets which were considered as ineligible for depreciation. On the other hand, the assessee has not produced any details before us to show that the depreciation was charged only on the generator sets and office equipments like computers etc. None of the parties before us have unfolded the actual assets, their WDV etc., on which the depreciation was claimed or disallowed. As a matter of fact, the dispute still remains whether the units, on assets of which, the assessee claimed depreciation, were completely closed for ever or were kept stand by after temporary suspension of production. The as....
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....on on the assets for being part to the block of assets. The BIFR directions do not override the provisions of Act. As long as the ownership of the assets continue to be with the assessee company, as for the purpose of Section 32 of the Act, the claim of assessee company fulfils the following essentials. 1st the assets are capital in nature. 2nd assets are still owned by the assessee company. 3rd the depreciation was claimed on the assets forming part of the non-operating plants in the block of assets. 4th WDV at the beginning of the year was available and the assets were used for the purpose of business or profession since they were three other working units and the company as a whole were still working. It is a settled provision of law that use for a purpose of business when applied to block of assets would mean use of block of asset and not any specific building or machinery. Reliance in this regard can be placed on the judgment of Hon'ble Delhi High Court in CIT vs. Bharat Aluminium company Ltd. 187 taxman.111. It will be also relevant to take into consideration the observations of Hon'ble Jurisdictional High Court in the case of CIT vs. Oswal (supra) Agro Mills Ltd. which is re....