The ITO, Ward-4(2), Baroda V. Paushak Limited, Baroda

ITA 1376/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1793 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation
• Section: 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.1376/AHD/2010 A. Y.: 2003-04 THE INCOME TAX OFFICER, WARD 4 (2), 4 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA 390 007 VS PAUSHAK LIMITED, 3 RD FLOOR, ADMINISTRATIVE BUILDING, ALEMBIC ROAD, BARODA PA NO. AABCP 2662 F (APPELLANT) (RESPONDENT) C. O. NO. 169/AHD/2010 (IN ITA NO.1376/AHD/2010: AY: 2003-04) PAUSHAK LIMITED, 3 RD FLOOR, ADMINISTRATIVE BUILDING, ALEMBIC ROAD, BARODA VS THE INCOME TAX OFFICER, WARD 4 (2), 4 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA 390 007 PA NO. AABCP 2662 F (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI SHELLEY JINDAL, CIT DR ASSESSEE BY SHRI S. N. SOPARKAR, AR O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE LEARNED CIT(A)-III, BARODA DATED 18 TH NOVEMBER, 2009 FOR ASSESSMENT YEAR 2003-04. ITA NO.1376/AHD/2010 AND CO NO.169/AHD/2010 PAUSHAK LIMITED, BARODA 2 2. IN THE CROSS OBJECTION OF THE ASSESSEE, THE ASSE SSEE CHALLENGED REOPENING OF THE ASSESSMENT U/S 147 OF T HE IT ACT. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE CROSS OBJECTION. THE SAME IS ACCORDINGLY DISMISSED AS BEING NOT PRES SED. 3. IN THE DEPARTMENTAL APPEAL, THE REVENUE CHALLEN GED THE ORDER OF THE LEARNED CIT(A) IN ALLOWING DEPRECIATION ON D ISCARDED PLANT & MACHINERY AMOUNTING TO RS.15.73 LACS OVERLOOKING TH E PROVISIONS OF SECTION 32 (III) OF THE IT ACT. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD DISCARDED THE PLANT & MACHINERY WORTH RS.62,94, 238/- DURING THE YEAR BUT STILL CLAIMED DEPRECIATION ON THE SAME. SI NCE THE PLANT & MACHINERY WAS DISCARDED AND NOT PUT TO USE DURING T HE YEAR, THE SAME WAS NOT FOUND ELIGIBLE FOR DEPRECIATION. IT WA S SUBMITTED BEFORE THE LEARNED CIT(A) THAT ONCE AN ASSET IS MERGED IN THE BLOCK OF ASSETS, IT LOOSES ITS INDIVIDUAL CAPACITY AND ONLY NET REALIZABLE VALUE CAN BE REDUCED FORM THE BLOCK OF ASSETS AS PER THE PROVISIONS OF SECTION 32 READ WITH SECTION 43 (6) OF THE IT ACT. IN THE CASE OF THE ASSESSEE, THE PLANT WAS DISCARDED AND NO MONEY WAS RECEIVED. IN VIEW OF SECTION 43(6) OF THE IT ACT ONLY MONEY RECE IVABLE OR SCRAP VALUE CAN BE REDUCED FROM THE BLOCK OF ASSETS. THE LEARNED CIT(A) NOTED THAT THE QUESTION INVOLVED IS WHETHER DEPRECI ATION IS ALLOWABLE ON ASSETS FROM THE BLOCK OF ASSETS WHICH HAVE BEEN DISCARDED BUT FOR WHICH NO MONEY HAS BEEN RECEIVED. THE LEARNED CIT(A ) NOTED THAT THE ISSUE IS DIRECTLY COVERED BY THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF INDOTHERM (INDIA) LTD. 69 TTJ 573. T HE APPEAL OF THE ASSESSEE WAS ACCORDINGLY ALLOWED. ITA NO.1376/AHD/2010 AND CO NO.169/AHD/2010 PAUSHAK LIMITED, BARODA 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF ITAT AHME DABAD BENCH IN THE CASE OF INDOTHERM (INDIA) LTD. (SUPRA) IN WHICH IT WAS HELD THAT IF ONE SINGLE ASSET OUT OF THE ENTIRE BLOCK HAS BEEN D ISCARDED OR NOT PUT TO USE BY THE ASSESSEE FOR THE BUSINESS CON SIDERATION PARTIAL DEPRECIATION CANNOT BE DISALLOWED ON THAT G ROUND, UNLESS AND UNTIL THE SCRAP VALUE OF THE MACHINERY DISCARDE D IS ASCERTAINED THE SAME CANNOT BE REDUCED FROM WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS. HE HAS ALSO RELIED UPON THE ORDER OF ITAT MUMBAI BENCH IN THE CASE OF G. R. SHIPPING IN ITA NO.822/MUM/2005 DATED 17-07-2008 IN WHICH IT WAS HE LD THAT AFTER AMENDMENT W. E. F. 1-4-1988, THE INDIVIDUAL ASSETS HAVE LOST ITS IDENTITY AND FOR THE PURPOSE OF ALLOWING DEPRECIAT ION, ONLY THE BLOCK OF ASSETS HAS TO BE CONSIDERED. IF A BLOCK OF ASSETS IS OWNED BY THE ASSESSEE AND USED FOR THE PURPOSE OF B USINESS, DEPRECIATION WILL BE ALLOWED. THEREFORE, TEST OF US ER HAS TO BE APPLIED UPON THE BLOCK AS A WHOLE INSTEAD OF UPON A N INDIVIDUAL ASSET. HE HAS ALSO SIMILARLY RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS YAMAHA MOTOR INDIA (P) LTD. 226 CTR 304 IN WHICH SIMILAR ISSUE HAS BEEN DECIDED . HE FURTHER RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS BHARAT ALUMINIUM CO. LTD. 187 TAXMAN 111 IN WHICH IT WAS HELD THAT EXPRESSION USED FOR THE PURPOSE OF BUSINESS WHEN APPLIED TO THE BLOCK OF ASSETS, WOULD MEAN USE OF B LOCK OF ASSETS AND NOT ANY SPECIFIC BUILDING, MACHINERY, PL ANT OR FURNITURE IN SAID BLOCK OF ASSETS AS INDIVIDUAL ASS ETS LOOSE THEIR IDENTITY AFTER BECOMING INSEPARABLE PART OF THE BLO CK OF ASSETS. ITA NO.1376/AHD/2010 AND CO NO.169/AHD/2010 PAUSHAK LIMITED, BARODA 4 THE SAME VIEW IS TAKEN BY ITAT HYDERABAD BENCH IN T HE CASE OF NATCO EXPORTS VS DCIT 89 TTJ 503. THE LEARNED COUNS EL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE. THE LEARNED DR CONCEDED THAT THE ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE. 5. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF T HE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS NOTED ABOVE. THE LEARNED CIT(A) ON PROPER APPRECIAT ION OF THE FACTS AND RELEVANT PROVISIONS OF LAW AND THE DECISIONS RI GHTLY DIRECTED THE AO TO ALLOW DEPRECIATION IN FAVOUR OF THE ASSESSEE. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL AND THE C ROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-03-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 25-03-2011 LAKSHMIKANT/- ITA NO.1376/AHD/2010 AND CO NO.169/AHD/2010 PAUSHAK LIMITED, BARODA 5 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD