ACIT, Circle-1, Aurangabad V. Good Year South Asia Tyres Pvt. Ltd., Aurangabad

ITA 1880/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8485 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 03-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1884/PN/2012 (ASSESSMENT YEAR : 1998-99) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, AURANGABAD. . APPELLANT VS. SOUTH ASIA TYRES LTD., H-18, MIDC WALUJ, AURANGABAD. PAN : AABCG5544P . RESPONDENT ITA NOS.1879 TO 1881/PN/2012 (A. YS. : 2002-03 TO 2004-05) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, AURANGABAD. . APPELLANT VS. GOOD YEAR SOUTH ASIA TYRES PVT. LTD., H-18, MIDC WALUJ, AURANGABAD. PAN : AABCG5544P . RESPONDENT DEPARTMENT BY : MR. P. S. NAIK ASSESSEE BY : MR. NEERAJ JAIN & MR. ABHISHEK AGARWAL DATE OF HEARING : 11-09-2014 DATE OF PRONOUNCEMENT : 15-09-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED FOUR APPEALS PREFERRED BY THE REVENUE RELATE TO THE SAME ASSESSEE AND INVOLVE CERTAIN COMMON ISSUES, TH EREFORE THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST, WE SHALL TAKE-UP THE APPEAL VIDE ITA NO.1 884/PN/2012, DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DATED 30.07.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 19.12.2000 ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 PASSED BY THE ASSESSING OFFICER, U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 1998-99. 3. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING TWO GROUNDS OF APPEAL :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) WAS CORRECT IN ALLOWING THE DEPRECIATION ON 2 ND HAND MACHINERY WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS FAILED T O PRODUCE THE WDV OF SUCH MACHINERY WHICH WAS PURCHASE BY THE ASSESSEE. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS CORRECT IN HOLDING THAT THE ASSESSING OFFICER W AS WRONG IN INVOKING THE EXPLANATION 3 OF SECTION 43 OF THE ACT. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT-ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956 AND IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF MANUFACT URE AND SALE OF AUTOMOTIVE TYRES, TUBES, FLAPS AT ITS FACTORY LOCATED AT WALUJ INDUSTRIAL AREA, AURANGABAD. FOR THE ASSESSMENT YEAR 1998-99, ASSESSEE FILED A R ETURN OF INCOME DECLARING A LOSS OF RS.91,74,27,308/- WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT WHEREBY THE ASSESSED LOSS WAS DETERMINED AT RS.81,8 3,24,719/- BY MAKING CERTAIN ADDITIONS. IN SO FAR AS THE PRESENT APPEAL IS CONCERNED THE ISSUE RELATES TO A DISALLOWANCE OF DEPRECIATION MADE BY T HE ASSESSING OFFICER TO THE EXTENT OF RS.1,59,54,775/-. THE AFORESAID DISALLOW ANCE OF DEPRECIATION WAS BASED ON THE DISALLOWANCE MADE IN EARLIER YEARS AS SESSMENTS ON THE BLOCK OF ASSETS TAKEN OVER. PERTINENTLY, THE FACTUAL MATRIX IS THAT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1995-96, RESPONDENT -ASSESSEE TOOK OVER THE MANUFACTURING UNIT AT WALUJ BELONGING TO CEAT LTD.. THE ASSESSEE HAD ACQUIRED THE SAID UNDERTAKING ON A SLUMP SALE BASIS AND THE OPERATIONS WERE STARTED IN SEPTEMBER, 1994. THE PURCHASE CONSIDERA TION PAID BY THE ASSESSEE FOR THE ASSETS TAKEN OVER FROM CEAT LTD. W AS RS.41,84,00,330/- DETERMINED ON THE BASIS OF A DUE DILIGENCE REPORT P REPARED BY M/S A.F. FERGUSON & CO.. THE BOOK VALUE OF SUCH ASSETS IN T HE HANDS OF CEAT LTD. WAS ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 RS.25,44,35,362/-. THUS, THE PURCHASE CONSIDERATIO N PAID BY THE ASSESSEE WAS HIGHER THAN THE WRITTEN DOWN VALUE OF SUCH ASSE TS IN THE HANDS OF CEAT LTD. BY AN AMOUNT OF RS.16,39,64,968/-. FOR THE RE ASONS STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PERTAININ G TO THE ASSESSMENT YEAR 1995-96, HE CONCLUDED THAT THE TRANSACTION IN QUEST ION INVOLVED OVER VALUATION OF ASSETS, WHICH WAS UNDERTAKEN WITH A VIEW TO CLAI M DEPRECIATION ON THE ENHANCED COST OF ASSETS. THEREFORE, HE INVOKED THE PROVISIONS OF EXPLANATION 3 BELOW SECTION 43(I) OF THE ACT AND HELD THAT THE DEPRECIATION WITH RESPECT TO THE ASSETS OF THE UNDERTAKING TAKEN OVER FROM CEAT LTD. WAS TO BE ALLOWED ON THE BASIS OF THE WRITTEN DOWN VALUE OF THE ASSETS A S APPEARING IN THE HANDS OF THE CEAT LTD. AND NOT ON THE BASIS OF THE ENHANCED COST PAID BY THE ASSESSEE. THE AFORESAID STAND OF THE ASSESSING OFFICER IN ASS ESSMENT YEAR 1995-96 DID NOT FIND FAVOUR WITH THE TRIBUNAL VIDE ITS ORDER IN ITA NO.132/PN/2003 & OTHERS DATED 28.07.2006. 5. IN THIS BACKGROUND, DURING THE YEAR UNDER CONSID ERATION, THE ASSESSING OFFICER DISALLOWED DEPRECIATION TO THE EXTENT OF RS .1,59,54,775/- BY ALLOWING DEPRECIATION ON THE BASIS OF HIS STAND FOR ASSESSME NT YEAR 1995-96 WHEREBY DEPRECIATION WAS ALLOWED ON WDV OF ASSETS IN THE HA NDS OF THE CEAT LTD. AND NOT ON THE BASIS OF ACTUAL COST PAID BY THE ASSESSE E. THE CIT(A) HAS NEGATED THE ACTION OF THE ASSESSING OFFICER ON ACCOUNT OF T HE ORDER OF THE TRIBUNAL DATED 28.07.2006 (SUPRA) IN ASSESSEES OWN CASE WHE REBY ASSESSEE WAS HELD ELIGIBLE FOR DEPRECIATION ON ACTUAL COST PAID FOR T HE ASSETS TAKEN OVER FROM CEAT LTD. 6. IN THIS BACKGROUND, AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT THE ORDER OF TH E TRIBUNAL DATED 28.07.2006 (SUPRA) FOLLOWED BY THE CIT(A) HAS SINCE BECOME FIN AL. IN THIS CONTEXT, IT IS TO BE NOTED THAT THE APPEAL OF THE REVENUE FOR ASSESSM ENT YEAR 1995-96 BEFORE THE HONBLE HIGH COURT WAS DISMISSED VIDE ITS JUDGE MENT IN TAX APPEAL ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 NOS.20 TO 22 OF 2007 DATED 18.03.2009. MOREOVER, T HE SLP FILED BY THE REVENUE AGAINST THE AFORESAID JUDGEMENT OF THE HON BLE HIGH COURT HAS ALSO BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE OR DER DATED 30.11.2009. 7. IN VIEW OF THE AFORESAID DISCUSSION, WE FIND NO MERIT IN THE PRESENT APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY D ISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1 884/PN/2012 IS DISMISSED. 9. THE OTHER THREE CAPTIONED APPEALS VIDE ITA NO.18 79, 1880 & 1881/PN/2012 HAVE BEEN PREFERRED BY THE REVENUE AGA INST A COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANG ABAD DATED 30.07.2012 WHICH, IN TURN, HAS ARISEN FROM RESPECTIVE ASSESSME NT ORDERS DATED 10.01.2005, 21.03.2006 & 06.12.2006 PASSED BY THE A SSESSING OFFICER U/S 143(3) OF THE ACT PERTAINING TO THE ASSESSMENT YEAR S 2002-03, 2003-04 & 2004-05 RESPECTIVELY. 10. IN ALL THESE APPEALS, THE REVENUE HAS RAISED ID ENTICAL GROUNDS OF APPEAL AS THE ISSUE INVOLVED IS COMMON. THEREFORE, WE MAY CONSIDER THE PARTICULARS IN RELATION TO THE APPEAL FOR ASSESSMEN T YEAR 2002-03, WHEREIN THE GROUNDS OF APPEAL READ AS UNDER :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) WAS CORRECT IN ALLOWING THE DEPRECIATION ON MACHINE RY USED FOR PRODUCTION OF TWO-THREE WHEELER TYRES USED FOR PART OF YEAR. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS CORRECT IN HOLDING THAT THE ASSESSING OFFICER W AS WRONG IN DISALLOWING THE DEPRECIATION ON IMPAIRED ASSETS. 11. ALTHOUGH, THE REVENUE HAS RAISED TWO GROUNDS OF APPEAL BUT THE GRIEVANCE IS SINGULAR RELATING TO THE DEPRECIATION AMOUNTING TO RS.30,01,373/-. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 12. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASS ESSMENT YEAR 2002-03, RESPONDENT-ASSESSEE COMPANY SUSPENDED THE PRODUCTIO N OF ITS TWO-THREE WHEELER TYRES. AS A RESULT, SOME OF THE PLANT & MA CHINERY FORMING PART OF THE BLOCK OF ASSETS HAVING WRITTEN DOWN VALUE OF RS.1,2 0,05,492/- AS ON 01.04.2002 WERE PUT TO USE ONLY FOR A PART OF THE Y EAR UNDER CONSIDERATION. THE WDV AS PER THE BOOKS OF ACCOUNT MAINTAINED UNDE R THE COMPANIES ACT, 1956 OF SUCH ASSETS WAS RS.5,82,37,212/-. THE AFOR ESAID ASSETS WERE RETIRED AND CONSIDERED AS AN IMPAIRMENT LOSS CHARGED TO THE PROFIT & LOSS ACCOUNT. HOWEVER, THE LOSS OF RS.5,82,37,212/- WAS ADDED BAC K IN THE COMPUTATION OF INCOME FOR INCOME-TAX PURPOSES, AND THE DEPRECIATIO N CLAIMED IN THE RETURN OF INCOME INCLUDED DEPRECIATION ON SUCH ASSETS ALSO. IN OTHER WORDS, INSPITE OF THE FACT THAT PLANT & MACHINERY FORMING PART OF THE BLOCK OF ASSETS WITH WRITTEN DOWN VALUE OF RS.1,20,05,492/- (AS PER THE INCOME-T AX RECORDS) AS ON 01.04.2002 WERE USED ONLY FOR PART OF THE YEAR, YET IN THE INCOME-TAX RETURN FILED BY ASSESSEE, IT CLAIMED DEPRECIATION ON THE S AID BLOCK OF ASSETS I.E. PLANT & MACHINERY AS A WHOLE INCLUDING THE AFORESAID ITEM S, WHICH WERE NOT IN USE THEREAFTER. 13. THE ASSESSING OFFICER DISALLOWED THE DEPRECIATI ON ON SUCH ASSETS ON THE GROUND THAT SUCH ASSETS WERE RETIRED AND CONSID ERED AS AN IMPAIRMENT LOSS CHARGED TO THE PROFIT & LOSS ACCOUNT IN THE AC COUNT BOOKS. IN ASSESSMENT YEAR 2002-03, THE DEPRECIATION DISALLOWE D ON THIS COUNT CAME TO RS.30,01,373/- (I.E. 25% OF RS.1,20,05,492/-). THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSESSEE. AS PER THE CIT(A), FOR THE PURPOSES OF ALLOWANCE OF DEPRECIATION IN TERMS OF SECTION 32(1) CERTAIN SPEC IFIED PERCENTAGE IS REQUIRED TO BE APPLIED ON THE WRITTEN DOWN VALUE OF EACH BLO CK OF ASSETS AS AT THE END OF THE RELEVANT PREVIOUS YEAR. SECTION 2(11) OF TH E ACT DEFINES THE EXPRESSION BLOCK OF ASSETS AND SECTION 43(6) OF THE ACT DEFI NES WRITTEN DOWN VALUE. ON THE BASIS OF THE AFORESAID PROVISIONS, THE CIT(A) C ONCLUDED THAT ONCE VARIOUS ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 ASSETS ARE CLUBBED TOGETHER AND FORMED A PART OF B LOCK OF ASSETS WITHIN THE MEANING OF SECTION 2(11) OF THE ACT THEN FOR THE PU RPOSES OF ALLOWANCE OF DEPRECIATION IT IS TO BE CONSIDERED AS ONE ASSET. ACCORDING TO HIM, INDIVIDUAL ASSETS LOSE THEIR IDENTITY FROM THE MOMENT EACH ASS ET BECOMES A PART OF THE BLOCK OF ASSETS AND AN INDIVIDUAL ASSET BECOMES INS EPARABLE IN SO FAR AS THE ALLOWANCE OF DEPRECIATION IS CONCERNED. IN SUM AND SUBSTANCE, AS PER THE CIT(A), IN THE CONCEPT OF THE BLOCK OF ASSETS INTRO DUCED W.E.F. 01.04.1988, IT IS NOT POSSIBLE TO SEGREGATE ITEMS FALLING WITHIN A BL OCK OF ASSET FOR THE PURPOSES OF GRANTING DEPRECIATION OR RESTRICTING THE CLAIM T HEREOF. IN COMING TO SUCH CONCLUSION, THE CIT(A) TOOK INTO CONSIDERATION THE RELIANCE PLACED BY THE ASSESSEE ON THE FOLLOWING JUDGEMENTS :- (I) CIT VS. BHARAT ALLUMINIUM CO. LTD., (2010) 187 TAXMANN.COM 111 (DEL); (II) CIT VS. OSWAL AGRO MILLS LTD., (2011) 238 CTR 113 (DEL); AND, (III) CIT VS. SONAL GUM INDUSTRIES, (2010) 233 CTR 516 (GUJ). 14. AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEF ORE US. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE REITERATED THE STAND OF THE ASSESSING OFFICER TO THE EFFECT THAT DEPRECIATION ON ASSETS W HICH WERE RETIRED AND CONSIDERED AS AN IMPAIRMENT LOSS CHARGED TO PROFIT & LOSS ACCOUNT, IS NOT ALLOWABLE. 15. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE F OR THE RESPONDENT- ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAD F AILED TO APPRECIATE THE SCHEME OF SECTION 32 OF THE ACT AS AMENDED BY THE T AXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 WHEREIN ALLOWANCE OF DEPRECIATION IS PRESCRIBED WITH REFERENCE TO BLOCK OF ASSETS AND NOT ON EACH ITEM OF ASSETS. FURTHER, IT HAS BEEN POINTED OUT T HAT SECTION 2(11) OF THE ACT DEFINES BLOCK OF ASSETS TO MEAN A GROUP OF ASSETS FALLING WITHIN THE CLASS OF ASSETS (I.E. BUILDING, MACHINERY, PLANT OR FURNITUR E) IN RESPECT OF WHICH THE ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 SAME RATE OF DEPRECIATION IS PRESCRIBED. IT HAS BE EN CONTENDED THAT THE CIT(A) HAS RIGHTLY APPRECIATED THAT AFTER THE INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSETS FOR ALLOWANCE OF DEPRECIATION, INDIVIDUAL IT EMS OF ASSETS FORMING PART OF THE BLOCK OF ASSETS, LOSE THEIR IDENTITY AND THE AL LOWANCE OF DEPRECIATION IS MADE ONLY WITH REFERENCE TO THE BLOCK OF ASSETS. I N THIS CONTEXT, IT IS SOUGHT TO BE POINTED OUT THAT FOR THE PURPOSES OF ALLOWING DE PRECIATION UNDER THE BLOCK CONCEPT, ACTUAL USE OF INDIVIDUAL ITEM OF ASSETS FO RMING PART OF THE BLOCK OF ASSETS IN THE RELEVANT YEAR IS OF NO CONSEQUENCE. IN THIS MANNER, THE DECISION OF THE CIT(A) IS SOUGHT TO BE DEFENDED AND RELIANCE HAS ALSO BEEN PLACED ON THE FOLLOWING DECISIONS :- (I) CIT VS. G. N. AGRAWAL, 271 ITR 250 (BOM); (II) CHHABRIA TRUST VS. ACIT, 264 ITR 12; (III) CIT VS. SONAL GUM INDUSTRIES 322 ITR 542 (GUJ ARAT); (IV) ACIT VS. S. K. PATEL FAMILY TRUST, 251 CTR 427 (GUJARAT); AND, (V) CIT VS. VALLBH GLASS WORKS LTD. (ITA NO.577 OF 2013) (GUJARAT). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. AS THE DISCUSSION IN THE EARLIER PARAGRAPHS WOULD SHOW, THE CONTROVER SY REVOLVES AROUND ASSESSEES CLAIM FOR DEPRECIATION ON BLOCK OF ASSET S COMPRISING OF PLANT & MACHINERY, WHEREIN SUCH BLOCK CONTAINED CERTAIN ASS ETS WHICH WERE RETIRED AND CONSIDERED AS IMPAIRED ASSETS. IN THE BOOKS OF ACCOUNT, ASSESSEE CLAIMED THE IMPAIRMENT LOSS AS A DEBIT TO THE PROFI T & LOSS ACCOUNT. HOWEVER, IN THE RETURN OF INCOME FILED ASSESSEE COMPUTED DEP RECIATION WITH REFERENCE TO THE BLOCK OF ASSETS, INCLUDING THE AFORESAID IMPAIR ED ASSETS. THE CLAIM HAS BEEN DENIED BY THE ASSESSING OFFICER PRIMARILY FOR THE REASON THAT SUCH IMPAIRED ASSETS WERE NOT PUT TO USE THEREAFTER. 17. IN OUR CONSIDERED OPINION, THE ASSESSING OFFICE R HAS NOT APPROPRIATELY APPRECIATED THE CONCEPT OF ALLOWANCE OF DEPRECIATIO N IN SECTION 32 WITH THE INTRODUCTION OF BLOCK OF ASSETS W.E.F. 01.04.1988. THE DEPRECIATION IN TERMS OF ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 THE BLOCK OF ASSETS CONCEPT IS TO BE ALLOWED ON THE ACTUAL COST OR WDV OF THE PARTICULAR BLOCK OF ASSETS, EVEN IF IT IS FOUND T HAT A PARTICULAR ASSET COMPRISED IN THE BLOCK OF ASSET HAS NOT BEEN PUT TO USE. THE AFORESAID PROPOSITION IS FOUNDED ON THE CONCEPT THAT DEPRECIATION IS ALLOWAB LE WITH RESPECT TO THE BLOCK OF ASSETS AND NOT THE INDIVIDUAL ASSETS. IN THIS C ONTEXT, THE CIT(A) HAS REFERRED TO THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARAT ALLUMINIUM CO. LTD. (SUPRA). IN THE SAID CASE, IT WAS FOUND THAT CERTAIN PLANT & MACHINERY WAS NOT PUT TO USE IN THE RELEVANT YEAR A ND THEREFORE DEPRECIATION THEREUPON WAS NOT ALLOWED. THE TRIBUNAL TAKING INT O CONSIDERATION THE CONCEPT OF BLOCK OF ASSETS INTRODUCED W.E.F. 01.0 4.1998 HELD THAT WHETHER AN INDIVIDUAL ASSET IS PUT TO USE IN A PARTICULAR YEAR OR NOT IS OF NO CONSEQUENCE INASMUCH AS THE REQUIREMENT OF LAW IS TO ESTABLISH THE USE OF CONCERNED BLOCK OF ASSETS AND NOT USE OF PARTICULAR ASSETS INDIVIDU ALLY. THE HONBLE DELHI HIGH COURT AFFIRMED THE VIEW OF THE TRIBUNAL AND THE FOL LOWING DISCUSSION IS RELEVANT :- AFTER GOING THROUGH THESE DECISIONS OF THE VARIOUS BENCHES OF THE TRIBUNAL AND THE SCHEMATIC INTENTION BEHIND THE PRO VISIONS RELATING TO DEPRECIATION CONTAINED IN THE AFORESAID PROVISIONS, WE ARE INCLINED TO AFFIRM THE VIEW TAKEN BY THE TRIBUNAL IN THE INSTANT CASE. WHILE DOING SO, WE HAVE IN MIND THE RATIONALE AND PURPOSE FOR WHICH THE CON CEPT OF BLOCK ASSET WAS INTRODUCED BY THE AMENDMENT IN THE PROVISIONS OF TH E ACT, AS REFLECTED IN THE CIRCULAR DATED 23.09.1988 OF THE CBDT. INTENTIO N BEHIND THESE PROVISIONS IS APPARENT. ONCE THE VARIOUS ASSETS ARE CLUBBED TOGETHER AND BECOME BLOCK ASSET WITHIN THE MEANING OF SECTIO N 2(11) OF THE ACT, FOR THE PURPOSE OF DEPRECATION IT IS ONE ASSET . EVERY TIME, A NEW ASSET IS ACQUIRED, IT IS TO BE THROWN INTO THE COMM ON HOTCHPOTCH, I.E., BLOCK ASSET ON MEETING THE REQUIREMENT OF DEPRECIAT ION ALLOWABLE AT THE SAME RATE. THE VALUE OF THE BLOCK ASSET INCREAS ES AND THE DEPRECIATION IS TO BE GIVEN ON THE AFORESAID VALUE, WHICH IS TO BE TREATED AS WRITTEN DOWN VALUE. INDIVIDUAL ASSETS LO SE THEIR IDENTITY FROM THAT VERY MOMENT IT BECOMES INSEPARABLE PART O F BLOCK ASSET INSOFAR AS CALCULATION OF DEPRECIATION IS CONCERNED . FUSION OF VARIOUS ASSETS INTO THE BLOCK ASSET GETS DISTURBED ONLY WHE N EVENTUALITY CONTAINED IN CLAUSE (III) OF SECTION 32 TAKES PLACE , VIZ., WHEN A PARTICULAR ASSET IS SOLD, DISCARDED OR DESTROYED IN THE PREVIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHICH FIRST BROUGH T IN USE). EVEN IN THAT EVENT, THE AMOUNT BY WHICH THE MONEYS PAYABLE IN RESPECT OF THAT PARTICULAR BUILDING, MACHINERY, ETC. TOGETHER WITH THE AMOUNT OF SCRAP VALUE IS TO BE DEDUCTED FROM TOTAL WRITTEN DOWN VAL UE OF THE 'BLOCK ASSET'. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 32. ONCE WE UNDERSTAND AND APPRECIATE THIS SCHEME C ONTAINED IN THE AFORESAID PROVISIONS, IT IS NOT POSSIBLE TO ACC EPT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT UNLESS A PARTI CULAR ASSET IS USED FOR THE PURPOSE OF BUSINESS OR PROVISION, DEPRECIATION IS NOT ALLOWED. NO DOUBT, AS PER SECTION 32(1) OF THE ACT, IN ORDER TO BE ENTITLED TO CLAIM DEPRECIATION, THE ASSET IS TO BE OWNED BY THE ASSES SEE AND IT IS ALSO TO BE USED FOR THE PURPOSE OF BUSINESS OR PROFESSIO N. HOWEVER, THE EXPRESSION 'USED FOR THE PURPOSE OF BUSINESS' WHEN APPLIED TO BLOCK ASSET WOULD MEAN USE OF BLOCK ASSET AND NOT ANY SPE CIFIC BUILDING MACHINERY, PLANT OR FURNITURE IN THE SAID BLOCK ASS ET AS INDIVIDUAL ASSETS HAVE LOST THEIR IDENTITY AFTER BECOMING INSE PARABLE PART OF THE BLOCK ASSET. THAT IS THE ONLY MANNER IN WHICH VAR IOUS PROVISIONS CAN BE HARMONIZED .................. ................ IN THE INSTANT CASE, THE PSL EQUIPMENT WAS PURCHASED AND PUT TO USE BY THE ASSES SEE IN PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1990-91 AND THE SAM E HAD ENTERED INTO THE BLOCK ASSET IN THAT YEAR. IT THUS LOST INDIVIDUAL IDENTITY FOR THE ALLOWANCE OF DEPRECIATION IN THAT YEAR. SINCE IT IS NOT IN DISPUTE FOR THE YEAR IN QUESTION THAT BLOCK OF ASSETS WAS USED, THE ASSESSEE WAS RIGHTLY GIVEN THE BENEFIT OF DEPRECATION IN THE YEA RS IN QUESTION. THE QUESTION STANDS ANSWERED AGAINST THE REVENUE. 18. TO THE SIMILAR EFFECT IS THE JUDGEMENT OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF OSWAL CHEMICALS AND FERTILIZERS LTD., 3 41 ITR 467 (DEL). THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SONAL GUM INDUSTRIES (SUPRA) HAS ALSO HELD THAT IN RELATION TO THE BLOCK OF ASSETS, IT IS NOT POSSIBLE TO SEGREGATE ITEMS FALLING WITHIN THE BLOCK FOR THE PURPOSES OF GRANTING DEPRECIATION OR RESTRICTING THE CLAIM THEREOF. ACCORDING TO THE HO NBLE HIGH COURT, ONCE IT IS FOUND THAT THE ASSETS ARE USED FOR BUSINESS, IT IS NOT NECESSARY THAT ALL THE ITEMS FALLING WITHIN THE PARTICULAR BLOCK OF ASSETS OUGHT TO BE SIMULTANEOUSLY USED FOR BEING ENTITLED TO THE ALLOWANCE OF DEPRECI ATION. 19. IN THE CASE BEFORE US, CERTAIN ITEMS OF PLANT & MACHINERY PERTAINING TO THE TWO-THREE WHEELER TYRES MANUFACTURING UNIT WERE FORMING PART OF THE BLOCK ASSETS AND WERE BEING PUT TO USE TILL THE PRECEDING ASSESSMENT YEAR 2001-02 AND FOR A PART OF THE YEAR UNDER CONSIDERATION. HO WEVER, SINCE THEN AND IN THE SUBSEQUENT ASSESSMENT YEARS, THESE ITEMS OF MACHINE RY WERE IMPAIRED AND NOT BEING PUT TO USE. IT HAS BEEN EXPLAINED BEFORE US THAT THE PRODUCTION OF TWO-THREE WHEELER TYRES WAS ABANDONED BY THE ASSESS EE AND HENCE THE NON- USE OF SUCH MACHINERY. NEVERTHELESS, THE ASSETS IN QUESTION ARE FORMING PART ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 OF BLOCK OF ASSETS AND THERE IS NO REQUIREMENT OF L AW, AS DISCUSSED IN THE EARLIER PARAGRAPHS TO ENSURE THAT EACH OF THE ITEM OF ASSETS COMPRISED IN THE BLOCK OF ASSET IS PUT TO USE IN ORDER TO CLAIM DE PRECIATION. THEREFORE, CONSIDERING THE ABOVE DISCUSSION, IN OUR VIEW, THE CIT(A) MADE NO MISTAKE IN ALLOWING ASSESSEES CLAIM FOR DEPRECIATION IN RELAT ION TO PART OF THE MACHINERY RELATING TO THE MANUFACTURE OF TWO-THREE WHEELER TY RES. 20. BEFORE PARTING, WE MAY ALSO REFER TO THE DECISI ONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DINESH KUMAR GULAB CHAND AGRAWAL VS. CIT, 267 ITR 788 AND THE HONBLE KARNATAKA HIGH COU RT IN THE CASE OF DCIT VS. YELAMA DASEPPA HOSPITAL, 290 ITR 253 WHICH WERE RELIED UPON BY THE ASSESSING OFFICER TO DENY THE CLAIM OF THE ASSESSEE . THE CIT(A) HAS DISTINGUISHED THE ABOVE DECISIONS AND WE DO NOT FIN D ANY INFIRMITY IN SUCH STAND OF THE CIT(A). IN SO FAR AS THE AFORESAID DE CISIONS ARE CONCERNED, A PERUSAL THEREOF REVEALS THAT IN THOSE CASES ASSETS WERE NOT AT ALL PUT TO USE IN THE YEAR OF ACQUISITION ITSELF, MEANING THEREBY THA T THE ASSETS DID NOT BECOME PART OF THE BLOCK OF ASSETS ON WHICH DEPRECIATION COULD BE ALLOWED IN TERMS OF SECTION 32 OF THE ACT. HOWEVER, IN THE CASE OF THE PRESENT ASSESSEE, IT IS UNDENIABLE THAT THE ASSETS IN QUESTION WERE ALREADY IN USE AND WERE FORMING PART OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE YEAR UNDER CONSIDERATION AND ON SUCH BLOCK OF ASSETS, DEPRECIATION WAS BEI NG CLAIMED AND ALLOWED IN THE PAST. THEREFORE, THE FACT THAT SUCH ASSETS WER E NOT IN USE HEREINAFTER CANNOT BE A REASON TO DENY DEPRECIATION ON SUCH ASS ETS WHICH FORM PART OF THE BLOCK OF ASSETS, I.E. PLANT & MACHINERY. 21. AS A RESULT OF THE AFORESAID DISCUSSION, WE HER EBY AFFIRM THE ORDER OF THE CIT(A) TO THE EFFECT THAT SINCE THE IMPAIRED AS SETS FORM PART OF THE BLOCK OF ASSETS, IT SHALL CONTINUE TO EXIST FOR THE PURPOSES OF ALLOWANCE OF DEPRECIATION UNDER THE ACT AS PER SECTION 32 OF THE ACT SO LONG AS THE RELEVANT BLOCK OF ASSETS CONTINUES TO EXIST. ITA NOS.1299 & 1300/PN/2012 A. Y. : 2008-09 22. IN VIEW OF THE AFORESAID DISCUSSION, WE AFFIRM THE ORDER OF THE CIT(A) AND THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2 002-03 IS DISMISSED. 23. IN SO FAR AS THE OTHER TWO APPEALS OF THE REVEN UE PERTAINING TO ASSESSMENT YEARS 2003-04 AND 2004-05 ARE CONCERNED, THE ISSUES INVOLVED AS WELL AS THE FACTS AND CIRCUMSTANCES ARE IDENTICA L TO THAT CONSIDERED BY US IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002- 03 IN THE EARLIER PARAGRAPHS. THEREFORE, OUR DECISION IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002-03 WOULD APPLY MUTATIS-MUTANDI S IN THE OTHER TWO APPEALS ALSO. 24. RESULTANTLY, APPEALS OF THE REVENUE IN ITA NOS. 1879, 1880 & 1881/PN/2012 PERTAINING TO ASSESSMENT YEARS 2002-03 , 2003-04 & 2004-05 RESPECTIVELY ARE DISMISSED. 25. IN THE FINAL ANALYSIS, ALL THE CAPTIONED APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 15 TH SEPTEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), AURANGABAD; 4) THE CIT, AURANGABAD; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE