M/S. DEEPAK NITRITE LTD. V. DY.COMMISSIONER OF INCOME TAX

TAXAP/429/2007

AI Insights

The case involves M/S. Deepak Nitrite Ltd., the appellant, challenging the decision of the Income Tax Appellate Tribunal, Ahmedabad, which had disallowed depreciation on certain items of a block of assets for the assessment year 1992-93. The primary legal question was whether the Tribunal was correct in disallowing depreciation for items not used during the accounting year. The High Court referenced decisions in similar cases, notably the Assistant Commissioner of Income Tax vs. S.K. Patel Family Trust and Commissioner of Income Tax vs. Sonal Gum Industries, which supported the assessee's position that depreciation should be allowed on the entire block of assets once they are put to use for business purposes, regardless of individual item usage within the block.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 762979 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 18-12-2014
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax vs. S.K. Patel Family Trust, Commissioner of Income Tax vs. Sonal Gum Industries
• Laws Referred To: Income-tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K M PARIKH
• Assessee Lawyers: MANISH SHAH
• Keywords: Assessment Order; Block of assets; Depreciation; Income tax appellate tribunal
• Section: 142(1); 143(2); 143(1)(a)

Judgement Text

"O/TAXAP/429/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 429 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ M/S. DEEPAK NITRITE LTD.....Appellant(s) Versus DY.COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MR MANISH J SHAH, ADVOCATE for the Appellant(s) No. 1 MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 4 O/TAXAP/429/2007 JUDGMENT Date : 18/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the assessee has challenged the judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No. 1709/Ahd/2001 for AY 1992-93. 2. While admitting this appeal on 23.11.2007, this Court has framed the following substantial question of law: “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the depreciation of Rs. 2,01,598/- in respect of some of the items of block of assets not used by the assessee during the accounting year ?” 3. The facts of the present case are that the return of income was filed on 31.12.1992. In the return the assessee company declared income under the Income-tax Act at Rs. 1,01,48,070/-. The said return was processed under sec. 143(1)(a) on 31.3.93, determining the total income at Rs. 1,01,48,070/-. In response to various notices issued under sec. 143(2) and 142(1) of the Act, the assessee company has furnished necessary details. After considering the material on Page 2 of 4 O/TAXAP/429/2007 JUDGMENT record, the assessment order came to be passed. The assessee company has challenged the said assessment order before the CIT(A) which was partly allowed. Against the order of CIT(A), the Revenue has preferred an appeal before the ITAT which was partly allowed. Being aggrieved by the order of ITAT, the assessee company has preferred the present Tax Appeal before this Court. 4. Heard the learned advocates appearing for the parties and considered the submissions. The issue involved in the present Tax Appeal is squarely covered by the decision of this Court in the case of Assistant Commissioner of Income Tax vs. S.K. Patel Family Trust, reported in [2012] 251 CTR 427 (Guj.) and the decision in the case of Commissioner of Income Tax vs. Sonal Gum Industries, reported in[2010] 322 ITR 542 (Guj), wherein,this court has held as under: “Held, that once the factory building was put to use, it was not possible to restrict the depreciation on the building by stating that only a portion thereof had been put to use. Similarly, in relation to the block assets, it is not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. Once, it was found that the assets were used for business, it Page 3 of 4 O/TAXAP/429/2007 JUDGMENT was not necessary that all the items falling within plant and machinery have to be simultaneously used for being entitled to depreciation. The assessee was entitled to depreciation on the block of assets for the assessment year 1988-89.” 5. In that view of the matter, we hold that on the facts and in the circumstances of the case, the Tribunal was not right in law in disallowing the depreciation of Rs. 2,01,598/- in respect of some of the items of block of assets not used by the assessee during the accounting year, is answered in favour of the assessee and against the Revenue. The present Tax Appeal is allowed. (K.S.JHAVERI, J.) (K.J.THAKER, J) mandora Page 4 of 4 "