CYBERSOL TECHNOLOGIES PVT. LTD., MUMBAI V. ITO 8 (1)(2), MUMBAI

ITA 2749/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1230 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 05-12-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 15-04-2016
• Court: TRIBUNAL
• Department Lawyers: JINTENDRA KUMAR
• Assessee Lawyers: K GOPAL MS NEHA PRANJAPE
• Keywords: Depreciation; Question of law
• Section: 32; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I , MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER ITA NO. 2749/MUM/2016 : (A.Y : 20 12 - 13 ) M/S CYBERSOL TECHNOLOGIES PVT. LTD. 524 - 527, RAHEJA METROPLEX (IJMIMA) BEHIND GOREGAON SPORTS CLUB OFF LINK ROAD, MALAD WEST MUMBAI 400 064 PAN : AABCC3318B VS. ITO 8(1)(2) ROOM NO.601 - A, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 0 20 ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI K GOPAL / MS NEHA PRANJAPE / RESPONDENT BY : SHRI JINTENDRA KUMAR / DATE OF HEARING : 1 7 / 01 /201 7 / DATE OF PRONOUNCEMENT : / 04 / 2017 / O R D E R PER C.N.PRASAD (J.M.) : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE LD. CIT (APPEALS) - 16 , MUMBAI DATED 1 5.01.2016 FOR THE ASSESSMENT YEAR 20 12 - 13 . 2 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS WHETHER THE DEPRECIATION IS ALLOWABLE ON THE SCRAPPED / DISCARDED ASSETS WHICH WERE FORMING PART OF BLOCK OF ASSETS. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE DURING THIS ASSESSMENT YEAR VACATED ITS RENTED PREMISES AT GEMSTAR COMMERCIAL COMPLEX AND MOVED TO THE NEW PREMIS ES AT RAHEJA METROPLEX. IN THE PROCESS, THE ASSESSEE DISPOSED OFF CERTAIN ASSETS WHICH COULD NOT BE SALVAGED AND MOVED TO THE NEW RENTED OFFICE AND THESE ARE ASSETS THAT HAD TO BE SCRAPPED. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THA T THE ASSESSEE CLAIMED DEPRECIATION ON THESE SCRAPPED / DISCARDED ASSETS ALSO WITHOUT REDUCING THEM FROM WDV OF THE BLOCK OF ASSETS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY THE DEPRECIATION CLAIMED ON THESE DISCARDED ASSETS SHOULD NOT B E DISALLOWED. THE ASSESSEE FILED ITS REPLY SUBMITTING THAT ASSESSEE DISCARDED SOME OF THE BUILDING MATERIALS IN THE NATURE OF LEASE HOLD IMPROVEMENTS AND OTHER ASSETS. IT IS SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 43(6), THE OPENING WDV OF BLOCK OF ASSETS OF ANY PREVIOUS YEAR SHALL BE ADJUSTED AS MENTIONED THEREIN. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT DISCARDED ALL THE ASSETS IN THE BLOCK AND HENCE IS ENTITLED TO DEPRECIATION ON THE CLOSING WDV. 4. WITHOUT PREJUDICE TO THE ABOVE SUBMISSI ONS, IT WAS CLAIMED BY THE ASSESSEE THAT IF IT IS ASSUMED THAT THE BLOCK HAS CEASED TO EXIST, THEN THE WDV AS ON 01.04.2011 SHALL BE TREATED AS SHORT TERM CAPITAL LOSS AS PER SECTION 50 OF THE INCOME TAX ACT AND ALLOWABLE AS A DEDUCTION AND IS ELIGIBLE TO BE SET OFF AGAINST THE INCOME UNDER THE HEAD PROFITS & GAINS FROM BUSINESS. 3 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . 5. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION ON THE DISCARDED ASSETS OBSERVING THAT IN THE ASSESSEES CASE, THERE IS NO EXISTENCE OF ASSETS AND THE Y ARE NOT PUT TO USE . T HEREFORE HE HELD THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE ON NON - EXISTING ASSET S AND THE ASSET WHICH IS NOT USED FOR THE BUSINESS, THE DEPRECIATION IS NOT ALLOWABLE. ON APPEAL, THE LD. CIT (APPEALS) AGREED WITH THE VIEW OF THE ASSESSING OFFICER . HE ALSO P LAC ED RELIANCE ON THE DECISION OF THE BOMBAY HIGH COURT, NAGPUR BENCH IN THE CASE OF DINESH KUMAR GULABC HAND AGARWAL VS. CIT [267 ITR 768] , AND THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ORIENTAL COAL COMPANY LTD. [206 ITR 682]. 6 . THE LD. COUNSEL FOR THE ASSESSEE BEFORE US VEHEMENTLY REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER SUBMITS THAT CLAUSE 11 OF SECTION 2 OF INCOME TAX ACT DEFIN ES BLOCK OF ASSETS AS A GROUP OF ASSETS FALLING WITHIN A CLASS OF ASSETS COMPRISING (A) TANGIBLE ASSETS BEING BUILDING, MACHINERY PLANT OR FURNITURE (B) INTANGIBLE ASSETS BEING KNOW - HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE IN RESPECT OF WHICH THE SAME PERCENTAGE OF DEPRECIATION IS PRESCRIBED. THE LD. COUNSEL SUBMITS THAT THE COST OF ASSETS FORMING PART OF THE BLOCK OF ASSETS GETS MERGED WITH THE WDV OF THE BLOCK AND THEIR IN DIVIDUAL IDENTITY IS LOST AS PER THE CONCEPT OF BLOCK OF ASSETS UNDER THE INCOME TAX ACT. THEREFORE, HE SUBMITS THAT IT IS IMPOSSIBLE AND IMPRACTICAL TO IDENTIFY THE WDV OF ANY INDIVIDUAL ASSET AND REDUCE IT FROM THE BLOCK OF ASSETS. THE LD. COUNSEL FURT HER SUBMITS THAT THE EXPRESSION U SED IN SECTION 32 THAT IS USED FOR THE PURPOSE OF BUSINESS OR PRO FESSION DOES NOT RELATE TO THE USE O F 4 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . ASSET IN THAT PARTICULAR YEAR BUT IT IMPLIES THAT THE ASSET SHOULD BE BUSINESS ASSET WHICH MIGHT HAVE BEEN USED IN THE BUSINESS AND NOT USED FOR ANY PERSONAL PURPOSE. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT ON ANALYZING THE PROVISIONS OF SECTION 32 AND 43(6)(C) OF THE ACT , ASSESSEE IS ALLOWED TO CLAIM DEPRECIATION ON THE FOLLOWING CONDITIONS : (1) ASSESSEE MUST BE OWNER OF THE ASSET . (2) ASSET MUST BE USED FOR THE PURPOSES OF BUSINESS OR PROFESSION . (3) ASSET MUST BE USED DURING THE PREVIOUS YEAR AND , (4) THE DEPRECIATION TO BE COMPUTED ON COST OR WDV OF BLOCK OF ASSETS AT THE RATE PRESCRIBED . LD. COUNSEL SUBMITS THAT WDV INCLUDES THE VALUE OF DISCARDED ASSETS. THE LD. COUNSEL FURTHER SUBMITS THAT THE ASSESSING OFFICERS CONTENTION THAT THERE IS NO EXISTENCE OF ASSETS AND THE DISC ARDED ASSETS ARE NOT PUT TO USE, HAS NO RELEVANCE BECAUSE OF THE CONCEPT OF BLOCK OF ASSETS . 8 . LD. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE DECISION OF HYDERABAD BENCH IN THE CASE OF DCIT VS. COROMANDEL BIO TECH INDUSTRIES (I) LTD. [20 T AXMANN 520] SUBMITS THAT IN ORDER TO ALLOW CLAIM FOR DEPRECIATION, USE OF INDIVIDUAL ASSETS FOR THE PURPOSE OF BUSINESS CAN BE EXAMINED ONLY IN FIRST YEAR OF PURCHASE AND IN SUBSEQUENT YEARS WHEN USE OF BLOCK OF ASSETS TO BE EXAMINED EXISTENCE OF INDIVIDUAL ASSET IN BLOCK OF ASSETS ITSELF AMOUNTS TO USE FOR PURPOSE OF BUSINESS. THE LD. COUNSEL SUBMITS THAT IN THIS CASE DEPRECIATION WAS ALLOWED TO THE ASSESSEE ON PONDS AND PLANT & MACHINERY FORMING PART OF BLOCK OF ASSETS EVEN THOUGH THESE PONDS AND PLANT & MACHINERY WERE DISCARDED 5 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . AND NOT USED AND OWNED BY THE ASSESSEE. HE ALSO RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS : (A) CIT VS. YAMAHA MOTOR INDIA (P) LTD [226 CTR 204] (B) INDUCTOTHERM (I) LTD VS. DCIT [73 ITD 329] (C) JCIT VS. CITY GROUP OVERSEAS SOFTWARE LTD [85 TTJ 87] (D) SWATI SYNTHETIC LTD. VS. ITO [38 SOT 208] ( MUMBAI) (E) GR SHIPPING LTD. VS DCIT, ITA 822/MUM/2005 DATED 17.07.2008. APPEAL BY THE REVENUE AGAINST THIS DECISION IS DISMISSED BY THE HIGH COURT IN ITA NO.598/2009 DATED 28.07.2009. 9 . THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED ON BEFORE US. THE ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DEPRECIATION ON ASSETS IS ALLOWABLE ON THE DISCARDED ASSETS WHICH WERE ALREADY FORMING PART OF BLOCK OF ASSETS AND WHEN PART OF ASSETS OF THE BLOCK WERE DISCARDED / SCRAPPED. THE ASSESSING OFFICER DENIED THE DEPRECIATION ON THE ASSETS DISCARDED BY THE ASS ESSEE OBSERVING THAT THERE IS NO EXISTENCE OF ASSETS AND THE ASSESSEE HAS NOT PUT TO USE THE ASSETS DURING THE RELEVANT ASSESSMENT YEAR. THE LD. CIT (APPEALS) REFERRING TO THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF DINESH KUMAR GULABCHAND AGARWA L VS. CIT (SUPRA) DENIED THE CLAIM FOR DEPRECIATION. 11. WE FIND THAT CONSIDERING THIS DECISION I .E. DINESH KUMAR GULABCHAND AGARWAL VS. CIT (SUPRA) , THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GR SHIPPING LTD. VS. JCIT (SUPRA) HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON BARGE WHICH MET WITH AN ACCIDENT AND SUNK IN THE OCEAN AND 6 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . WHICH IS FORMING PART OF BLOCK OF ASSETS. IT WAS HELD THAT THE INDIVIDUAL ASSET LOSES ITS IDENTITY AND THE DEPRECIATION SHOULD BE ALLOWED IN RESPECT O F WHOLE OF THE BLOCK. IT WAS HELD THAT T HE CONDITIONS OF USER REQUIRE D FOR ALLOWING THE DEPRECIATION APPLIES ONLY IN RESPECT OF FIRST YEAR WHERE THE INDIVIDUAL ASSET ENTERS THE BLOCK FOR THE FIRST TIME AND THEREAFTER THE DEPRECIATION SHOULD BE ALLOWED ON T HE ENTIRE BLOCK ON ROUTINE BASIS IRRESPECTIVE OF USER CONDITION. THE CO - ORDINATE BENCH WHILE HOLDING SO OBSERVED AS UNDER : 6. THE TAXATION LAW (AMENDMENT) ACT, 1986, HAD CHANGED THOROU GHLY THE SYSTEM OF ALLOWING DEPRECIATION WITH EFFECT FROM 01.04. 1988. BY THESE PROVISIONS, THE CONCEPT OF BLOCK OF ASSETS BROUGHT INTO ST ATUTE BOOK FOR THE PURPOSE OF ALLOWING DEPRECIATION. THE RELEVANT PROVISI ONS AS IT STOOD AFTER THE AMENDMENT THAT IS APPLICABLE TO THE YEAR CONSIDERATION READS AS UNDER: - 32. (1) IN RESPECT OF DEPRE CI ATION OF BUILDINGS, MACHINERY, PLANT OR FURNITURE OWNED BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FO LL OWING DEDUCTIONS SHALL, SUBJECT TO THE PR OVISIONS OF SECTION 34, BE ALLOWED . (I) ** ** (II) I N THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN D OWN VALUE THEREOF AS MAY BE PRESCRIBED: PROVIDED THAT WHERE THE ACTUAL COST OF ANY MACHINERY OR PLANT DOES NO T EXC EED (FIVE THOUSAND) RUPEES, THE ACTUAL COST THEREOF SHALL BE ALLOWED AS A DEDUCTION IN RESPECT OF THE PREVIOUS YEAR IN WHICH SUCH MACHI NERY OR PLANT IS FIRST PUT TO USE BY THE ASSESSEE FOR THE PUR POSES OF HIS BUSINESS OR PROFESSION.' 7. FROM THE ABOVE, IT IS CLEAR THAT DEPRECIATION IS TO BE ALLOWED ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT SUCH PERCENTAGE AS MAY BE PRESCRIBED. 8. BLOCK OF ASSETS IS DEFINED IN SECTION 2(11) AS UNDER: BLOCK OF ASSETS MEANS A GROUP OF ASSETS FALLING WITHIN A CLASS OF ASSETS, BEING BUILDINGS, MACHINERY, PLANT OR FURNITURE, IN RESPEC T OF WHICH THE SAME PERCENTAG E OF DEPRECIATION IS PRESCRIBED. 7 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . 8.1 SECTION 43(6) PROVIDES DEFINITION OF W.D.V. CLAUSE (C) OF SECTION 43(6) READS AS UNDER: - 4 3(6) - WRITTEN DOWN VALUE' MEANS - (A) ** ** (B) ** ** (C) IN THE CASE OF ANY BLOCK OF ASSETS, -- (I ) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE LOT DAY OF APRIL, 1988, THE AGGREGATE OF THE WRITTEN DOWN VALUES OF ALL THE ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR AND ADJUSTED, -- (A) BY THE INCREASE BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK, ACQUIRED DURING THE PREVIOUS YEAR; AND (B) BY THE REDUCTION OF THE MONEYS PAYABLE IN RESPECT OF ANY ASSET FALLING WITHIN THAT BLOCK, WHICH IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR T O GETHER WITH THE AMOUNT OF THE SCRAP VALUE, IF ANY, SO, HOWEVER, THAT THE AMO UNT OF SUCH REDUCTION DOES NOT EXCEED THE WRITTEN DOWN VALUE AS SO INCREASED; AND (II) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSE SSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1989, THE WRITTEN DOWN VALUE OF T HAT BLOCK OF ASSETS IN THE IMMEDIATELY PRECEDING PRE VIOUS YEAR AS REDUCED BY THE DEPRECIATION ACTU ALLY ALLOWED IN RESPECT OF THAT BLOCK OF ASSET S IN RELATION TO THE SAID PRECEDING PREVIOUS YEAR AND AS FURTHER ADJUSTED BY THE INCREASE OR THE REDUCTION REFERRED TO IN ITEM (I) . 9. THUS, FOR THE ASSESSMENT YEAR 1988 - 89, THE W.D.V. OF ANY BLOCK OF ASSETS SHALL BE THE AGGREGATE OF THE W.D.V. OF ALL T HE ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR. FROM THIS, THE ADJUSTMENT HAS TO BE MADE FOR THE INCREASE OR REDUCTION IN THE BLOCK OF ASSETS DURING THE YEAR UNDER CONSIDERATION. 10. THE LEGISL ATURE FELT THAT KEEPING T HE DETAILS WITH REGARD TO EACH AND EVERY DEPRECIABLE ASSETS WAS TIME CONSUMING BOTH FOR THE ASSESSEE AND THE 8 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . ASSESSING OFFICER. THEREFORE, THEY AMENDED THE LAW TO PROVIDE FOR ALLO WING OF THE DEPRECIATION ON THE ENTIRE BLOCK OF ASSETS INSTEAD OF EACH INDIVI DUAL ASSETS. THE BLOCK OF ASSETS HAS ALSO BEEN DEFINED TO INCLUDE THE GR OUP OF ASSETS FALLING WITH THE SAME CLASS OF ASSETS. HENCE, AFTER THE AMENDMENT WITH EFFECT FROM 01.04.1988, THE INDIVIDUAL ASSETS HAVE LOST ITS IDENTITY AND FOR THE PURPOSE OF ALLOWIN G OF DEPRECIATION, 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 BUSINESS, DEPRECIATION WILL BE ALLOWED. THEREFORE, THE TEST OF USER HAS TO BE APPLIED UPON THE BLOCK AS A WHOLE INST EAD OF UPON AN INDIVIDUAL ASSET. 11. THE ABOVE PRINCIPLE HAS BEEN LAID DOWN IN THE FOLLOWING DECISIONS RELIED UPON BY THE ID. COUNSEL FOR THE ASSESSEE NAMELY; (A) NOTCO EXPORTS. VS. DCIT, 86 LTD 445 (HYD.), ( B) ACIT VS. SRF LTD., VOL. 21 SOT 122 (DEL.), & (C ) UNITEX PRODUCTS LTD. VS. ITO, VOL. 22 SOT 429 (MUM). 12. THE LD. DR HOWEVER SUBMITTED THE USER WAS A CONDITION FOR ALLOWING DEPRECIATION AND IN THIS REGARD RELIED TO THE DECISION OF THE H ON'BLE B OMBAY HIGH COURT IN THE CASE OF DINESHKUMAR GULABCHAN D AGRAWAL V. C IT ,, 267 ITR 768 (BO M ). WE HAVE PERUSED THE AFORESAID DECISION AND ARE OF THE VIEW THAT THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE ASSESSEE HAS ALREADY USED THE ASSET FOR THE PURPOSE OF BUSINESS. THE ASSET HAS ALREADY ENTERED THE BLOCK OF ASSETS. IN THE CASE BEFORE THE HON'BLE BOMBAY HIGH COURT, THE ASSET IN QUESTION WAS NOT AT ALL PUT TO USE. WE THEREFORE, FIND THE DECISION RELIED UPON THE ID. DR. IS OF NO ASSISTANCE TO THE PLEA OF THE DR. RESPECTFUL LY FOLLOWING THE DECISIONS OF THE TRIBUNALS REFERRED TO THE ABOVE, WE HOLD THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION AND THE ASSESSING OFFICER DIRECTED TO ALLOW THE SAME. 12 . THE APPEAL FILED BY THE REVENUE AGAINST THE ABOVE DECISION OF THE CO - ORDINATE BENCH IS DISMISSED BY THE BOMBAY HIGH COURT HOLDING AS UNDER : THE QUESTION SO UGH T TO BE RAISED IN THIS APPEAL IS BASED ON THE GR OUND OF NON USER OF THE BARG E IN THE SU BJECT A.Y., THOUGH THEY WERE USED IN THE PREVIOUS A.Y. ACCORDING TO REVENUE DEPRECIATION WOULD NOT BE AVAILABLE UNDER SECTION 32 OF THE INCOME TAX ACT. THE QUESTION SOUGHT TO BE CANVASSED IS SQUARELY COVERED BY TWO JUDGEMENTS OF THIS COURT ONE IN THE CASE OF WHITTLE ANDERSON LTD. VS. CIT 79 ITR 6 13 AND A NOTHER IN THE CASE OF CIT VS G N AGRAWAL (INDIVIDUAL) 217 ITR 250 . IN THIS V IEW OF THE MATTER, APPEAL STANDS DISMISSED FOR WANT OF SUBSTANTIAL QUESTION OF LAW . N O O RDER AS TO COSTS . 9 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . 13 . WE ALSO FIND THAT THE CO - ORDINATE BENCH CONSIDERED THIS ISSUE IN THE CASE OF SWATI SYNTHETICS LTD (SUPRA), WHEREIN IT WAS HELD AS UNDER : 7.14 IN CONCEPT OF DEPRECIATION ON BLOCK ASSETS ONE DOUBT COMES TO THE MIND THAT HOW DEPRECIATION CAN BE ALLOWED ON ASSETS WHICH WERE NOT USED FOR THE PURPOSE OF BUSINESS. THE REPLY TO THIS DOUBT IS AVAILABLE IN THE OBJECT OF THE SCHEME AND RESPECTIVE CONSEQUENCE AMENDMENTS IN THE ACT. THE LEGISLATURE WAS AWARE ABOUT THIS SITUATION, THEREFORE, VARIOUS CORRESPONDING AMEN DMENTS WERE MADE IN RESPECTIVE PROVISIONS OF THE ACT, IF ANY DEPRECIATION HAS BEEN CLAIMED ON AN ASSET OF BLOCK OF ASSETS WHICH WAS NOT USED, THAN THE PROFIT/INCOME FOR THAT YEAR WILL BE REDUCED BUT THIS ASPECT OF THE MATTER HAS BEEN TAKEN CARE BY - THE AMEN DED S. 50 OF THE ACT, WHEN ASSET IS TRANSFERRED/SOLD AND BLOCK CEASES THE CALCULATION OF SHORT - TERM CAPITAL GAIN WILL BE MORE AS IN THOSE CASES WDV WILL BE LESS . 7.15 IN THE LIGHT OF ABOVE DISCUSSIONS, THE CONDITION/REQUIREMENT OF S. OF WORD 'USED FOR TH E PURPOSE OF BUSINESS' AS PROVIDED 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 PURPOSE OF BUSINESS CAN BE EXAMINED ONLY IN THE FIRST YEAR WHEN THE ASSET IS PURCHASED. IN SUBSEQUENT YEARS USE OF BLOCK OF ASSETS IS TO BE EXAMINED. EXISTENCE OF INDIVIDUAL ASSET IN BLOCK OF ASSETS ITSELF AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS. THIS VIEW IS FULLY SUPPORTED BY VARIOUS 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 ORDER. THE SAID PROVISO TO S. 32 REQUIRES THAT WHORE AN ASSET IS ACQUIRED BY THE ASSESSEE DURING THE PREVIO US YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB - SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMO UNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CI. (I) OR CI. (II) OR CI. (IIA), AS THE CASE MAY BE. WHEN AN ASSET PURCHASED IS SATISFIED THE ABOVE CONDITION IN THE YEAR OF PURCHASE THAT ASSET WILL BE INCLUDED IN THE RESPECTIVE BLOCK OF ASS ET. DEPRECIATION 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 YEAR. ONCE AN ASSET IS INCLUDED IN THE BLOCK OF ASSETS ITS REMAINED IN BLOCK FOR ITS ENTIRE LIFE. THE END OF ASSET, I.E., TO GO OUT FROM BLOCK IS ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THERE ARE FOLLOWING THREE SITUATIONS PROVIDED IN THE STATUTES WHEN AN INDIVIDUAL ASSET OF THE BLOCK GOE S 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. 10 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . (2) AN ASSET NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION BUT USED OTHER THAN BUSINESS P U RPOSES AS PROVIDED IN S. 38(2) OF THE ACT. (3) WHERE ANY BLOCK OF ASSETS DOES NOT CEASE TO EXIST BUT THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE DEPRECIABLE ASSETS BY THE ASSESSEE DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE AMOUNTS STATED IN S. 50 OF THE ACT AND WHERE ANY BLOCK OF ASSETS CEASES TO EXIST FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PREVIOUS YEAR.' 7.16 IN THE CASE UNDER CONS IDERATION, THE ADMITTED FACTS ARE THAT THE DIVISION OF SURAT HAD BEEN CLOSED BUT THE BLOCK OF ASSETS OF THE CLOSED UNIT, (THE DIVISION OF SURAT) ALONG WITH OTHER ASSETS OF THE BLOCK WERE USED FOR THE PURPOSE OF BUSINESS IN EARLIER YEARS. THE YEAR UNDER CON SIDERATION IS NOT THE FIRST YEAR OF THE ASSETS ACQUIRED. THE ASSETS OF CLOSED UNIT STILL REMAINED EXIST/PART OF THE BLOCK OF ASSETS. THE ASSETS DID NOT FALL UNDER ANY OF THE ABOVE EXCEPTIONAL THREE CONDITIONS. THE SAID BLOCK OF ASSETS WAS USED FOR THE PURP OSE OF BUSINESS DURING THE YEAR. UNDER THE CIRCUMSTANCES, THE ASSETS OF THE SAID CLOSED UNIT AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS IN THE YEAR UNDER CONSIDERATION, WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATIO N. WE, ACCORDINGLY, ALLOW THE CLAIM OF THE ASSESSEE. 14. FURTHER, THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS YAMAHA MOTOR INDIA (P) LTD. (SUPRA) HELD AS UNDER : NO DOUBT, THE EXPRESSION USED I N S . 32 IS 'USED FOR THE PURPOSES OF THE BUSINES S'. HOWEVER, THIS EXPRESSION HAS T O BE READ HARMONIOUSLY WITH THE EXPRESSION 'DISCARDED' AS FOUND IN CLAUSE (III) OF SS. (1). OBVIOUSLY, WHEN A THING IS DISCARDED IT IS NOT USED. THUS 'USE' AND 'DISCARDING' ARE NOT IN THE SAME FIELD AND CANNOT STAND TOGET HER. HOWEVER, IF A HARMONIOUS READING OF THE EXPRESSIONS 'USED FOR THE PURPOSES OF THE BUSINESS' AND 'DISCARDED' IS ADOPTED, THEN IT WOULD SHOW THAT 'USED FOR THE PURPOSES OF THE BUSINESS' ONLY MEANS THAT THE ASSESSEE HAS USED THE MACHINERY FOR THE PURPOSE S OF THE BUSINESS IN EARLIER YEARS. IT IS NOT DISPUTED THAT IN THE FACTS OF THE PRESENT CASE, THE MACHINERY IN QUESTION WAS IN FACT USED IN THE PREVIOUS YEAR AND DEPRECIATION WAS ALLOWED ON THE BLOCK OF ASSETS IN THE PREVIOUS YEARS. TAKING THEREFORE A REA LISTIC APPROACH AND ADOPTING A HARMONIOUS CONSTRUCTION, THE EXPRESSION 'USED FOR THE PURPOSES OF THE BUSINESS' AS FOUND IN S. 32 WHEN USED WITH RESPECT TO DISCARDED MACHINERY W OULD MEAN THAT THE USER IN THE BUSINESS IS NOT IN THE RELEVANT FINANCIAL YEAR/PREVIOUS YEAR, BUT IN 11 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . THE EARLIER FINANCIAL YEARS. ANY OTHER INTERPRETATION WOULD LEAD TO AN INCONGRUOUS SITUATION. THEREFORE, THE TRIBUNAL WAS CORRECT IN LAW IN DIRECTING THE A O TO RECOMPUTE DEPRECIATION AFTER REDUCING THE SCRAP VALUE OF THE ASSETS WHICH HAVE BEEN DISCARDED AND WRITTEN OFF IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION FROM THE WDV O F THE BLOCK OF ASSET S. 1 5 . IN VIEW OF WHAT IS DISCUSSED ABOVE AND FO LLOWING THE ABOVE DECISIONS WE HOLD THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON THE ASSETS WHICH WERE DISCARDED AS THE ASSETS WERE FORMING PART OF BLOCK OF ASSETS . T HE BLOCK CONTINUES AND DID NOT CEASE TO EXIST AS ONLY PART OF ASSETS OF THE BLOCK WER E DISCARDED NOT THE ENTIRE BLOCK. 1 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH DAY OF APRIL 2017 . SD/ - SD/ - ( RA JENDRA ) ( C.N.PRASAD ) / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 12 .04. 2017 LR, SPS 12 M/S CYBERSOL TECHNOLOGIES PVT. LTD . ITA NO. 2749 /MUM/20 1 6 , A.Y.20 12 - 13 . / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /