Bharath Mines and Minerals, Bengaluru V. Assistant Commissioner of Income-tax, Circle-1(2)(1), Bengaluru

ITA 1989/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4184 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-01-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 12-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS K SURYAWANSHI
• Assessee Lawyers: K R PRADEEP
• Keywords: Business income; Depreciation; Principle of natural justice
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1989 /BANG/201 8 ASSESSMENT YEAR : 20 1 4 - 1 5 M/S. BHARAT MINES AND MINERALS, FLAT NO. 101, PRIDE ELITE, NO. 10, MUSEUM ROAD, BANGALORE 560 001. PAN: AAIFB5964G VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 (2) (1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.R. PRADEEP, CA RESPONDENT BY : SHRI VIKAS K. SURYAWANSHI, ADDL. CIT (DR) DATE OF HEARING : 23 .0 1 .2019 DATE OF PRONOUNCEMENT : 15 .0 2 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-1, BANGALORE DATED 04.04.2018 FOR ASSESS MENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE AUTHORITIES BELOW IN SO FA R AS IT IS AGAINST THE APPELLANT IS AGAINST THE LAW, FACTS, CIRCUMSTANCES, NATURAL JUSTICE, WITHOUT JURISDICTION, BAD IN LAW AND ALL OTHER KNOW N PRINCIPLES OF LAW. 2. THAT THE TOTAL INCOME AND TOTAL TAX COMPUTED IS HEREBY DISPUTED. 3. THAT THE AUTHORITIES BELOW ERRED IN DISALLOWING DEPRECIATION RELATING TO FIXED ASSETS AMOUNTING TO RS.3,88,36,29 0/-. 4. THAT THE AUTHORITIES BELOW ERRED IN HOLDING THAT UNDER THE FACTS AND CIRCUMSTANCES THE DECISION OF THE HON'BLE SUPREME C OURT RESULTS IN TOTAL STOPPAGE OF BUSINESS OF PERMANENT NATURE. 5. THAT THE AUTHORITIES BELOW ERRED IN ASSUMING THA T THE PLANT WAS NOT OPERATIONAL. 6. THAT THE CIT-A ERRED IN CONFIRMING THE DISALLOWA NCE OF DEPRECIATION BY REJECTING THE GROUND ON 'BLOCK OF A SSET' CONCEPT. ITA NO. 1989/BANG/2018 PAGE 2 OF 8 7. THAT THE AUTHORITIES BELOW ERRED IN RELYING ON I RRELEVANT MATERIAL AND IGNORING THE RELEVANT MATERIAL. 8. FOR THE ABOVE AND OTHER GROUNDS AND REASONS WHIC H MAY BE SUBMITTED DURING THE COURSE OF HEARING OF THE APPEA L, THE ASSESSEE REQUESTS THAT THE APPEAL BE ALLOWED AS PRAYED AND J USTICE BE RENDERED. 3. THE RELEVANT FACTS IN BRIEF ARE THAT IT IS NOTED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER THAT IT IS NOTICED THAT ASSESSEE H AS CLAIMED AN AMOUNT OF RS. 5,85,98,656/- TOWARDS DEPRECIATION FOR THE PRES ENT YEAR. THE AO HAS FURTHER NOTED THAT FIXED ASSETS OF THE ASSESSEE INC LUDE BUILDING AND PLANT AND MACHINERY RELATED TO THE MINING ACTIVITY OF THE ASSESSEE. THE AO FURTHER NOTED IN THE SAME PARA THAT ASSESSEE HAS NO T CARRIED OUT ANY MINING ACTIVITY DURING THE FINANCIAL YEAR 2013-14 RELEVANT TO ASSESSMENT YEAR 2014-15. THE AO HAS ALSO NOTED THAT ASSESSEE HAS I NCOME ONLY FROM CONTRACT RECEIPTS FOR TRANSPORTATIONS AND RAKE LOAD ING CHARGES. THEREAFTER THE AO HAS NOTED THAT THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECIATION SHOULD NOT BE DISALLOWED ON THE PLANT AND MACHINERY AND BUILDING WHICH IS NO T UTILIZED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE SUBMITTED REPLY VIDE LETTER DATED 05.12.2016 RECEIVED BY THE AO ON 06.12.2016 WHICH I S REPRODUCED BY THE AO IN PARA 3.2 OF THE ASSESSMENT ORDER. IN THE SAI D WRITTEN SUBMISSIONS, THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGEMENT O F HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. SOUTHERN PETR OCHEMICAL INDUSTRIES CORPN. LTD. AS REPORTED IN 301 ITR 255. HE ALSO PL ACED RELIANCE ON THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT &ANR VS. BLEND WELL BOTTLES (P) LTD. AS REPORTED IN 323 ITR 18. RELIANCE IS ALSO PLACED ON ANOTHER JUDGEMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. SOUTHERN HYDRO CARBON LTD. A S REPORTED IN 146 CTR 55. THE AO HELD THAT THESE JUDGEMENTS ARE NOT APPL ICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. THE AO HAS N OTED THAT THE ASSESSEE M/S. BHARAT MINES AND MINERALS HAS BEEN CLASSIFIED UNDER CATEGORY C I.E. THE ASSESSEE HAS CARRIED OUT ILLEGAL MINING AND IS FOUND TO BE INVOLVED IN FLAGRANT VIOLATION OF THE FOREST (CONSERVATION) ACT . THE AO HAS ALSO NOTED THAT CENTRAL EMPOWERED COMMITTEE (CEC) HAS RECOMMEN DED FOR ITA NO. 1989/BANG/2018 PAGE 3 OF 8 CANCELLATION / DETERMINATION OF MINING LEASES FALLI NG UNDER CATEGORY C AND TO ALLOT SUCH MINES TO THE END USERS THROUGH BIDDIN G IN A TRANSPARENT WAY. AFTER CONSIDERING THE JUDGEMENTS RELIED UPON BY THE LD. AR OF ASSESSEE BEFORE THE AO, THE AO HAS MADE DISALLOWANCE OF RS. 3,88,36,290/- OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE OF RS. 5,85,98 ,656/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY LD. AR OF ASSESSEE THAT COPY OF FINANCIAL STATEMENTS OF THE ASSESSEE FOR FINANCIAL YEAR 2011-12 IS AVAILABLE ON PAGES 160 TO 163 OF PAPER BOOK AND THE SAME FOR FINANCIAL YEAR 2012-13 ARE AVAILABLE ON PAGES 164 TO 167 OF PAPER BOOK. HE POINTED OUT THAT AS P ER THE SCHEDULE 13 OF OTHER INCOME FOR ASSESSMENT YEAR 2012-13 AVAILABLE ON PAGE NO. 162 OF PAPER BOOK, THERE IS INCOME OF RS. 12 LAKHS ON ACCO UNT OF LEASE RENT RECEIPTS, RS. 2,39,909/- ON ACCOUNT OF LOADING CHAR GES RECEIPTS AND RS. 4,37,925/- ON ACCOUNT OF WEIGHMENT CHARGES RECEIPTS . HE FURTHER SUBMITTED THAT SIMILARLY FOR FINANCIAL YEAR 2012-13 ALSO, SIM ILAR RECEIPTS ARE THERE AS CAN BE SEEN ON PAGE NO. 166 OF PAPER BOOK WHICH SHO WS RECEIPT OF RS. 12 LAKHS ON ACCOUNT OF LEASE RENT RECEIPTS, RS. 2.40 L AKHS ON ACCOUNT OF LOADING CHARGES RECEIPTS AND RS. 22,22,159/- ON ACC OUNT OF WEIGHMENT CHARGES RECEIPTS. REGARDING CURRENT ASSESSMENT YEA R, HE SUBMITTED THAT THE COPY OF AUDITED FINANCIAL STATEMENTS IS AVAILAB LE ON PAGES 66 TO 78 OF PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRA WN TO PAGE NO. 73 OF PAPER BOOK WHERE IN SCHEDULE 9, THE DETAILS OF OTHE R INCOME ARE AVAILABLE WHICH INCLUDES CONTRACT INCOME OF RS. 8,24,72,035/- . RELIANCE WAS PLACED BY HIM ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. A) CIT &ANR VS. BLEND WELL BOTTLES (P) LTD. (SUPRA) B) CIT VS. SOUTHERN PETROCHEMICAL INDUSTRIES CORPN. LTD. (SUPRA) C) CIT VS. SOUTHERN HYDRO CARBON LTD. (SUPRA) D) BHARAT ALUMINIUM CO. LTD. VS. CIT,(2010)187TAXMA N111(DELHI HC) E) SWATI SYNTHETICS LTD. VS. ITO, (2010) 38 SOT 020 8 (MUMBAI TRIB.) 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE THE DETAILS OF DEPRECIATION AMOUNT OF RS. 3,88,36,290/- FOR WHICH DISALLOWANCE HAS BEEN MADE BY THE AO AND THESE DETAILS ARE AVAIL ABLE ON PAGE NO. 6 OF ITA NO. 1989/BANG/2018 PAGE 4 OF 8 THE ORDER OF CIT(A) AND HENCE, THE SAME ARE REPRODU CED HEREINBELOW FOR READY REFERENCE. PARTICULARS RATE DEPRECIATION (RS.) BLOCK - I MINE BUILDING & BOREWELL 10% 2,25,654 MINE DEVELOPMENT EXPENSES 10% 2,78,757 BUILDING @ RNPR 10% 47,97,054 BLOCK - IV PLANT & MACHINERY 15% 2,46,20,415 15% 74,44,638 33 KV POWER LINE (RANJITHPURA) 15% 14,69,772 TOTAL 3,88,36,290 6. ON PAGE NO. 72 OF THE PAPER BOOK IS THE COMPLETE DETAILS OF DEPRECIATION CLAIMED BY THE ASSESSEE OF RS. 5,85,98,656/-. THES E DETAILS ARE ALSO REPRODUCED HEREINBELOW FOR READY REFERENCE. NO. PARTICULARS RATE DEPRECIATION 31 - MAR - 14 01. BLOCK - I MINE BUILDING & BOREWELL 10% 2,25,654 MINE DEVELOPMENT EXPENSES 10% 2,78,757 BUILDING @ RNPR 10% 47,97,054 RAILWAY SIDING BUILDING 10% 10,58,750 02. BLOCK II FURNITURE & FIXTURE 10% 72,707 FURNITURE & FIXTURE 10% 4,966 03. BLOCK -III COMPUTERS 60% 38,706 COMPUTERS 60% 1,281 04. BLOCK IV VEHICLES 15% 8,01,860 PLANT & MACHINERY 15% 2,46,20,415 15% 74,44,638 33 KV POWER LINE (RANJITHPURA) 15% 14,69,772 RAILWAYSIDING TRACKS 15% 1,75,93,266 RAILWAY SIDING WEIGH BRIDGE 15% 1,74,616 05. BLOCK V PLANT & MACHINERY 80% 2,553 06. BLOCK - VI LAB EQUIPMENTS 10% 13,660 TOTAL 5,85,98,656 ITA NO. 1989/BANG/2018 PAGE 5 OF 8 7. FROM THE ABOVE TWO CHARTS, IT IS SEEN THAT OUT O F BUILDING BLOCK, DISALLOWANCE HAS BEEN MADE IN RESPECT OF MINE BUILDING &BOREWELL OF RS. 2,25,654/-, MINE DEVELOPMENT EXPENSES OF RS. 2,78,757/-, BUILDI NG @ RNPR OF RS. 47,97,054/- BUT NO DISALLOWANCE WAS MADE OUT FOR RA ILWAY SIDING BUILDING FOR WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 10,58,750/- AND THIS STANDS FULLY ALLOWED BY THE AO OUT OF 10% DEPRECIAT ION BLOCK. OUT OF PLANT AND MACHINERY 15% BLOCK, THE AO HAS MADE DISALLOWAN CE OF TOTAL AMOUNT OF RS. 2,46,20,415 & RS. 74,44,638/-. SIMILARLY IN RESPECT OF 33 KV POWER LINE (RANJITHPURA) 15% BLOCK ALSO, THE AO HAS MADE TOTAL DISALLOWANCE OF THE CLAIM OF RS. 14,69,772/-. IN RESPECT OF RAILWA Y SIDING TRACKS 15% BLOCK AND RAILWAY SIDING WEIGH BRIDGE 15% BLOCK, THE CLAI M OF THE ASSESSEE FOR DEPRECIATION OF RS. 1,75,93,266/- AND RS. 1,74,616/ - RESPECTIVELY WAS ALLOWED BY THE AO. HENCE IT IS SEEN THAT DISALLOWA NCE HAS BEEN MADE BY THE AO IN RESPECT OF TWO BLOCKS I.E. 10% BUILDING B LOCK, 15% PLANT AND MACHINERY BLOCK AND IN BOTH THESE BLOCKS, DEPRECIAT ION HAS BEEN ALLOWED BY AO ON SOME ITEMS WHEREAS THE AO DISALLOWED DEPRECIA TION ON SOME ITEMS IN EACH OF THESE TWO BLOCKS. IN THE LIGHT OF THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF VARIOUS JUDGEMENTS CITED BY LD. AR OF ASSESSEE AS NOTED ABOVE. 8. WE FIRST EXAMINE THE APPLICABILITY OF TRIBUNAL O RDER RENDERED IN THE CASE OF SWATI SYNTHETICS LTD. VS. ITO (SUPRA). PARA 7.15 O F THIS TRIBUNAL ORDER IS RELEVANT AND HENCE THE SAME IS REPRODUCED FROM PAGE NO. 61 OF PAPER BOOK. 7.15 IN THE LIGHT OF ABOVE DISCUSSIONS, THE CONDITI ON/REQUIREMENT OF S. OF WORD 'USED FOR THE PURPOSE OF BUSINESS' AS PROVI DED IN S. 32 OF (1) OF THE ACT FOR THE CONCEPT OF DEPRECIATION ON BLOCK OF ASSETS CAN BE SUMMARIZED, THAT USE OF INDIVIDUAL ASSET FOR THE PU RPOSE OF BUSINESS CAN BE EXAMINED ONLY IN THE FIRST YEAR WHEN THE ASS ET IS PURCHASED. IN SUBSEQUENT YEARS USE OF BLOCK OF ASSETS IS TO BE EX AMINED. EXISTENCE OF INDIVIDUAL ASSET IN BLOCK OF ASSETS ITSELF AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS. THIS VIEW IS FULLY SUPPORTED BY VARIOU S PROVISIONS OF THE ACT WHICH WERE AMENDED CONSEQUENCE TO THE SCHEME OF DEPRECIATION ON BLOCK OF ASSETS INCLUDING TO PROVISO TO S. 32 OF THE ACT OF WHICH DETAILED DISCUSSION IS MADE IN ABOVE PARA OF THIS O RDER. THE SAID PROVISO TO S. 32 REQUIRES THAT WHORE AN ASSET IS AC QUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ON E HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UN DER THIS SUB-SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIF TY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CL. ITA NO. 1989/BANG/2018 PAGE 6 OF 8 (I) OR CL. (II) OR CL. (IIA), AS THE CASE MAY BE. W HEN AN ASSET PURCHASED IS SATISFIED THE ABOVE CONDITION IN THE YEAR OF PUR CHASE THAT ASSET WILL BE INCLUDED IN THE RESPECTIVE BLOCK OF ASSET. DEPRE CIATION FOR THAT YEAR WILL BE CALCULATED ON WDV IN ACCORDANCE WITH S. 43( 6) OF THE ACT BY THE INCREASE OPENING WDV BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK, ACQUIRED DURING THE PREVIOUS YEA R. ONCE AN ASSET IS INCLUDED IN THE BLOCK OF ASSETS ITS REMAINED IN BLO CK FOR ITS ENTIRE LIFE. THE END OF ASSET, I.E., TO GO OUT FROM BLOCK IS ONL Y IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THERE ARE FOLLOWING THR EE SITUATIONS PROVIDED IN THE STATUTES WHEN AN INDIVIDUAL ASSET O F THE BLOCK GOES OUT OF BLOCK : '(1) AN ASSET IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR AS PROVIDED IN SS. 43(6)(C)(I)(B ) AND 32(1)(III) OF THE ACT. (2) AN ASSET NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION BUT USED OTHER THAN BUSINESS PURPOSES AS PROVIDED IN S. 38(2) OF THE ACT. (3) WHERE ANY BLOCK OF ASSETS DOES NOT CEASE TO EXI ST BUT THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESU LT OF THE TRANSFER OF THE DEPRECIABLE ASSETS BY THE ASSESSEE DURING THE P REVIOUS YEAR EXCEEDS THE AGGREGATE OF THE AMOUNTS STATED IN S. 5 0 OF THE ACT AND WHERE ANY BLOCK OF ASSETS CEASES TO EXIST FOR THE R EASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PRE VIOUS YEAR. 9. FROM THE ABOVE PARA REPRODUCED FROM THIS TRIBUNA L ORDER, IT IS SEEN THAT IT IS HELD BY THE TRIBUNAL THAT THE EXISTENCE OF INDIVIDU AL ASSET IN BLOCK OF ASSETS ITSELF AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS. THE TRIBUNAL ALSO HELD THAT USED FOR THE PURPOSE OF BUSINESS AS PROVIDED IN SECTION 32 (1) OF IT ACT FOR THE CONCEPT OF DEPRECIATION ON BLOCK OF ASSETS CAN BE SUMMARIZED BY SAYING THAT USE OF INDIVIDUAL ASSET FOR THE PURPOSE OF BUSINESS CAN BE EXAMINED ONLY IN THE FIRST YEAR WHEN THE ASSET IS P URCHASED AND IN SUBSEQUENT YEARS, USE OF BLOCK OF ASSETS FOR THE PU RPOSE OF BUSINESS IS SATISFIED ON THIS FINDING ALONE THAT THERE IS EXIST ENCE OF ASSET IN THE BLOCK OF ASSETS. IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE AO THAT SOME ASSET OF BUILDING BLOCK AND PLANT & MACHINERY BLOCK ARE N OT EXISTING IN THE RESPECTIVE BLOCK OF ASSETS. IN RESPECT OF EACH OF THESE TWO BLOCKS, THE AO IS ALSO ALLOWING DEPRECIATION IN RESPECT OF SOME ASSET S INCLUDED IN THESE TWO BLOCKS. HENCE IN OUR CONSIDERED OPINION, PART AMOU NT OF DEPRECIATION DISALLOWED BY THE AO IN RESPECT OF SOME ASSET IN EA CH OF THESE TWO BLOCKS IS NOT JUSTIFIED AND IT IS NOT AS PER LAW. ITA NO. 1989/BANG/2018 PAGE 7 OF 8 10. WE HAVE ALSO SEEN THAT AS PER PARA 7.15 OF THE TRIBUNAL ORDER AS REPRODUCED ABOVE, THREE SITUATIONS HAVE BEEN PROVID ED IN THE STATUTES WHEN AN INDIVIDUAL ASSET OF THE BLOCK GOES OUT OF BLOCK. A) THE FIRST CONDITION SPECIFIED SHOWS THAT THE ASS ET WAS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THE RELEVANT PREV IOUS YEAR AS PROVIDED IN SS. 43(6)(C)(I)(B) AND 32(1)(III) OF TH E ACT. B) THE SECOND SPECIFIED CONDITION IS AN ASSET NOT E XCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION BUT USED OTH ER THAN BUSINESS PURPOSES AS PROVIDED IN SECTION 38(2) OF IT ACT. C) THE THIRD SPECIFIED CONDITION IS WHERE ANY BLOCK OF ASSETS DOES NOT CEASE TO EXIST BUT THE FULL VALUE OF THE CONSIDERAT ION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE DEPRECIABLE ASSE TS BY THE ASSESSEE DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF T HE AMOUNTS STATED IN SECTION 50 OF IT ACT AND WHERE ANY BLOCK OF ASSETS CEASES TO EXIST FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TR ANSFERRED DURING THE PREVIOUS YEAR. 11. IN THE PRESENT CASE, NONE OF THE THREE CONDITIO NS ARE BEING SATISFIED AND THEREFORE IN OUR CONSIDERED OPINION, DEPRECIATION I S ALLOWABLE ON BOTH THE BLOCKS IN FULL AND THE SAME CANNOT BE REDUCED IN TH E MANNER DONE BY THE AO. THIS IS NOT THE CASE OF THE AO THAT THERE IS N O BUSINESS INCOME OF THE ASSESSEE BECAUSE PART DEPRECIATION IS ALLOWED BY TH E AO ALSO. THE OBJECTION OF THE AO IS THIS THAT THE ASSESSEE IS EN GAGED IN ILLEGAL MINING ACTIVITY AND FOR THIS REASON, THE MINING LICENSE IS CANCELLED. THIS IS NOT THE CASE OF THE AO THAT THE ASSETS IN QUESTION CANNOT B E USED BY THE ASSESSEE IN SOME OTHER BUSINESS. IN FACT, THIS IS ADMITTED B Y THE AO ALSO THAT PART ASSETS OF THESE TWO BLOCKS ARE BEING USED FOR BUSIN ESS PURPOSE AND AO HIMSELF ALLOWED PART DEPRECIATION FOR EACH OF THESE TWO BLOCKS. NOW THE QUESTION IS THIS THAT IF SOME ASSETS OF A BLOCK OF ASSETS ARE NOT USED IN A PARTICULAR YEAR, WHETHER FOR ALLOWING DEPRECIATION, WE HAVE TO ENSURE THAT EACH ITEM OF THE BLOCK OF ASSETS WAS USED FOR BUSIN ESS PURPOSE. IN OUR HUMBLE OPINION, THIS IS NOT THE REQUIREMENT OF LAW THAT IN THE BLOCK OF ASSETS CONCEPT, BUSINESS USE OF EACH OF THE ASSETS OF THE BLOCK HAS TO BE SEEN AND EXAMINED AND DEPRECIATION IS TO BE ALLOWED ONLY IN RESPECT OF THE ASSETS ITA NO. 1989/BANG/2018 PAGE 8 OF 8 USED. ONE EXAMPLE WILL CLARIFY OUR OPINION. SUPPOSE , THERE IS AN ASSET WITH W.D. V. OF RS. 10 LACS INCLUDED IN A BLOCK OF ASSET S OF RS. 100 LACS AND THE SAME IS SOLD FOR RS. 5 LACS. IN THAT SITUATION, THE AMOUNT OF SALE PROCEEDS RECEIVED RS. 5 LACS HAS TO BE REDUCED FROM THE BLOC K I.E. RS. 100 LACS AND ON THE BALANCE AMOUNT OF THE BLOCK I.E. RS. 95 LACS , DEPRECIATION IS TO BE ALLOWED. WE NOTE THAT IN THIS CASE, ONE OF THE ASSE TS IS NOT EVEN OWNED BY THE ASSESSEE BECAUSE IT WAS SOLD OUT BUT STILL, DEP RECIATION IS ALLOWABLE ON WDV LESS SALE PROCEEDS. HENCE, IT IS CLEAR THAT BUS INESS USE OF EACH ITEM OF A BLOCK OF ASSETS IS NOT NECESSARY FOR ALLOWING DEP RECIATION ON THE BLOCK. WE THEREFORE DELETE THE DISALLOWANCE OF DEPRECIATION M ADE BY THE AO BY RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER RENDERED IN THE CASE OF SWATI SYNTHETICS LTD. VS. ITO (SUPRA. SINCE, WE DECIDE T HE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THIS TRIBUNAL ORDER, OTHER CI TED JUDGMENTS ARE NOT BEING DISCUSSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE ME NTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODI A) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH FEBRUARY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.