Banarsi Dass Vij alias Satish Kumar Vij, Shimla V. ACIT, Shimla

ITA 699/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63941 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 699/CHD/2012 ASSESSMENT YEAR: 2007-08 SHRI BANARSI DASS VIJ V ACIT, CIRCLE SHIMLA, ALIAS SATISH KUMAR VIJ, SHIMLA. CHHOTA SHIMLA, SHIMLA. PAN: ACPPV-2460E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K.GULATI RESPONDENT : SHRI AKHILESHGUPTA DATE OF HEARING : 28.08.2012 DATE OF PRONOUNCEMENT : 12.09.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 10.05.2012 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS NOT JUSTIFIED IN UPHOLDING T HE ADDITION OF RS. 356240/- ON ACCOUNT OF DEPRECIATION CLAIMED ON ACCOUNT OF AD DITION OF NEW ASSET THAT IS HYDRAULIC EXCAVATOR UNDER THE BLOCK OF HEAD ' PLANT & MACHINERY' WHICH IS AGAINST THE SPIRIT OF LAW, THE DEPRECIATION CLAIMED DESERVES TO BE ALLOWED. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, A LTER OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING OF APPEAL OR BEFORE THE APPEAL IS BEING HEARD. 2 3. IN THE GROUNDS OF APPEAL, APPELLANT CHALLENGED T HAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.3,56,2 40/- ON ACCOUNT OF DEPRECIATION CLAIMED ON THE GROUND OF AD DITION OF NEW ASSET I.E. HYDRAULIC EXCAVATOR UNDER THE BLOCK OF HEAD PLANT & MACHINERY WHICH IS AGAINST THE SPIRIT OF LAW. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT WAS ARGUED THAT THE IMPUGNED ASSET IS PART OF THE BLOC K OF ASSETS, EVEN THOUGH THE SAME HAS NOT ENTERED INTO THE BLOCK OF ASSETS AS IS EVIDENT FROM THE FACTUAL MA TRIX OF THE CASE. LD. 'DR' CONTENDED THAT NO DEPRECIATION IS A DMISSIBLE TO THE ASSESSEE, AS THE ASSET WAS NOT EVEN BROUGHT TO THE CITY, WHERE THE UNIT IS LOCATED. THEREFORE, THE QU ESTION OF ENTERING THE SAME IN THE BLOCK ASSET, DOES NOT ARIS E. HE WAS OF THE VIEW THAT ASSESSEE IS NOT AT ALL ELIGIBLE FO R DEPRECIATION ON THE IMPUGNED ASSET, AS THE SAME WAS NOT PUT TO USE AND EVEN IT CANNOT BE SAID THAT THE IMPU GNED ASSET BECAME PART OF THE BLOCK ASSETS. 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. ASSESSEE IS A CIVIL CONTRACTOR AND DURING THE PERIOD UNDER REFERENCE, H YDRAULIC EXCAVATOR MACHINE WAS PURCHASED ON 28.03.2007 FROM BANGALORE. THE IMPUGNED ASSET WAS TO BE TRANSPORTE D TO SHIMLA BY ROAD. THE ASSESSEE FAILED TO ESTABLISH T HE FACTUM THAT THE IMPUGNED ASSET WAS PUT TO USE BEFORE 31.3. 2007. CONSEQUENTLY, AO DISALLOWED DEPRECIATION ON THE SAI D MACHINE. 3 6. BEFORE CIT(A), THE LD. 'AR' PLACED RELIANCE ON C ERTAIN DECISIONS, WHICH HAVE BEEN DULY CONSIDERED BY THE C IT(A). 7. WE HAVE PERUSED THE FINDINGS OF LD. CIT(A) AND T HE RELEVANT PROVISIONS OF THE ACT, INCLUDING THE FACT- SITUATION OF THE PRESENT CASE, AS THE IMPUGNED ASSET HAS NOT EVE N ENTERED TO THE CITY SHIMLA, THE QUESTION OF CONSTRU ING THE SAME AS PART OF THE BLOCK ASSET, IS NOT FEASIBLE. FURTHER, THE IMPUGNED ASSET WAS NOT PUT TO USE, AS RECORDED BY T HE AO AND THE CIT(A). THEREFORE, BASED ON THE FACTUAL MA TRIX OF THE CASE AND RELEVANT PROVISIONS OF THE ACT, INCLUD ING FINDINGS OF THE CIT(A), WE DO FIND ANY MERIT IN THE CONTENTION RAISED BY THE COUNSEL OF THE ASSESSEE. THEREFORE, APPEAL OF THE ASSESSEE IS DISMISSED. HOWEVER, FOR T HE SAME OF READY REFERENCE AND PROPER APPRECIATION OF THE S AME, THE FINDINGS OF THE CIT(A) ARE REPRODUCED HEREUNDER : 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSID ERED WITH REFERENCE TO THE FACTS OF THE CASE, THE RELEVANT PROVISIONS O F LAW AND THE CASE LAWS RELIED UPON. WHILE MAKING HIS SUBMISSIONS, THE APPELLANT H AS RELIED UPON THE PROVISIONS OF SECTION 32 AND SECTION 2(11) READ WITH RULE 5 OF THE INCOME TAX RULES, 1962 IN A PIECEMEAL MANNER. THE APPELLANT HA S NOT PAID ANY ATTENTION TO THE FACT THAT THERE ARE TWO CONDITIONS WHICH ARE RE QUIRED TO BE SATISFIED IN ORDER TO MAKE AN ASSET ELIGIBLE FOR DEPRECIATION: (A) THE ASSET MUST BE OWNED WHOLLY OR PARTLY BY THE ASSESSES (B) THE ASSET MUST BE USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. 4. 1 FURTHER, AS PER THE SECOND PROVISO TO SECTION 32, IF AN ASSET IS ACQUIRED B THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN 180 DAYS IN THAT PREVIOUS YEARS , 4 THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE RES TRICTED TO 50% OF THE AMOUNT CALCULATED AND THE % PRESCRIBED FOR THAT ASSET. 4.2 THUS IT IS IMPORTANT TO DETERMINE F IRST WHETHER OR NOT AN ASSET ACQUIRED DURING THE PREVIOUS YEAR FULFILLS THE COND ITIONS OF ELIGIBILITY FOR DEPRECIATION DURING THE PREVIOUS YEAR. IN CASE THE ASSET IS ACQUIRED AND OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND IS USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION FOR A PERIOD OF MORE THAN 18 0 DAYS IN THAT PREVIOUS YEAR, THE DEPRECIATION IN RESPECT OF SUCH ASSET SHALL BE ALLOWED AT THE FULL % PRESCRIBED FOR THE BLOCK OF ASSETS TO WHICH IT WILL EVENTUALLY BELONG. IF AN ASSET IS ACQUIRED AND OWNED WHOLLY OR PARTLY BY THE ASSES SEE AND USED FOR THE PURPOSES OF BUSINESS OR PROFESSION DURING THAT PREV IOUS YEAR FOR A PERIOD OF LESS THAN 180 DAYS, THE DEPRECIATION SHALL BE ALLOWED @ 50%. BUT IF AN ASSET IS ACQUIRED DURING THE PREVIOUS YEAR AND NOT USED AT ALL FOR THE PURPOSES OF BUSINESS OR PROFESSION DURING THAT PREVIOUS YEAR, T HE SAID ASSET SHALL NOT BE ENTITLED TO ANY DEPRECIATION DURING THAT PREVIOUS YEAR. IN THE CASE OF THE APPELLANT, THE GIVEN ASSET I.E. THE HYDRAULIC EXCAV ATOR MACHINE WAS NOT RECEIVED BY HIM TILL THE CLOSING OF THE PREVIOUS YE AR. THEREFORE, THE QUESTION OF USING IT FOR THE PURPOSES OF HIS BUSINESS DURING THE GIVEN PREVIOUS YEAR JUST DOES NOT ARISE. EVEN THE APPELLANT HAS NOT CONTROVE RTED THE SAID FACTUAL POSITION. INSTEAD HE HAS ARGUED THAT EVEN WHERE THE MACHINERY WAS KEPT READY FOR USE BUT COULD NOT BE PUT TO USE, THE ASSESSEE W OULD BE ENTITLED TO DEPRECIATION ON MACHINERY. HOWEVER THIS ARGUMENT OF THE APPELLANT IS NOT FOUND RELEVANT IN HIS CASE AS THE HYDRAULIC EXCAVAT OR HAD NOT EVEN REACHED SHIM/A TILL THE END OF THE PREVIOUS YEAR. AS REGARD S THE APPELLANT'S ARGUMENT THAT THE INDIVIDUAL ASSETS LOSE THEIR IDENTITY AFTE R BECOMING INSEPARABLE PART OF THE BLOCK OF ASSETS, THE SAME IS A/SO MISCONCEIVED. THE APPELLANT HAS FAILED TO APPRECIATE THAT EVEN IN THE CASES RELIED UPON BY HI M, THE HON'B/E COURTS HAVE ACKNOWLEDGED THAT THE USER TEST WILL BE RELEVANT IN THE YEAR OF ENTRY INTO THE BLOCK I.E. IN THE YEAR IN WHICH THE ASSET IS ACQUIR ED AND USED. AFTER THE ADOPTION OF THE CONCEPT OF BLOCK DEPRECATION, WHAT IS RELEVANT IS THAT AN ASSET ENTERS THE BLOCK ON BEING BROUGHT TO USE. ONCE IT BECOMES A PART OF THE BLOCK OF ASSETS, THE USE OF ITEM-WISE MACHINERY IS NOT CONSIDERED NECESSARY IN THE SUBSEQUENT YEARS, UNLIKE THE EARLIER TIMES WHEN THE ASSET-WISE DEPRECIATION WAS IN VOGUE. WHEN ASSET-WISE DEPRECIA TION WAS IN VOGUE, IT HAD TO BE SHOWN THAT EACH ASSET WAS USED ATLEAST FO R SOME TIME DURING THE YEAR BY THE ASSESSEE. IN THE CASE OF BLOCK OF ASSET S, ONCE AN ASSET ENTERS THE BLOCK, DEPRECIATION CANNOT BE DENIED WITH REFERENCE TO ANY PARTICULAR ASSET IN THE BLOCK ON THE BASIS OF ITS NON-USE. IT WAS SO PO INTED OUT BY THE HON'BLE 5 TRIBUNAL IN ACIT VS. JAGDISH V. SHETH (2006) 285ITR (AT) 179 (M UM.). THUS USE OF AN ASSET IS NECESSARY AT THE TIME OF EN TERING THE BLOCK. SIMILAR VIEW HAS BEEN MAINTAINED IN THE CASE OF CIT VS. BHARAT ALUMINUM CO. LTD. SUPRA RELIED UPON BY THE APPELLANT. THE HON'BL E DELHI HIGH COURT HAS HELD IN THIS CASE THAT EVERY TIME A NEW ASSET IS AC QUIRED, IT IS TO BE THROWN INTO THE COMMON HOTCH-POTCH I.E. BLOCK OF ASSETS ON MEET ING THE REQUIREMENT OF DEPRECIATION ALLOWABLE AT THE SAME RATE. IN THE SUB SEQUENT YEARS, IT IS THE USE OF BLOCK OF ASSETS WHICH BECOMES THE YARDSTICK AND NOT THE INDIVIDUAL ASSET ALREADY ACQUIRED IN THE EARLIER YEARS OTHER THAN TH E PREVIOUS YEAR IN WHICH IT IS FIRST BROUGHT INTO USE. THE SAID JUDGMENT WAS DELIV ERED IN THE CONTEXT OF DEPRECIATION ON AN OLD MACHINERY WHICH WAS AN EXIST ING PART OF THE BLOCK OF ASSETS. SO WAS THE POSITION IN THE CASE OF CIT VS. SONAL GUM INDUSTRIES SUPRA RELIED UPON BY THE APPELLANT. BUT IN THE CASE OF TH E ASSESSEE THE MACHINERY WAS NOT EVEN RECEIVED AND USED DURING THE GIVEN PREVIOU S YEAR. THEREFORE IT COULD NOT HAVE BECOME A PART OF THE BLOCK OF ASSETS OWNED BY THE APPELLANT. THUS THERE ARISES NO QUESTION OF ALLOWING ANY DEPRECIATI ON TO THE APPELLANT IN RESPECT OF THE SAID MACHINERY. THE DISALLOWANCE MADE BY THE LD. A. O. IS, THEREFORE, IN ORDER AND IS UPHELD. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12 TH SEPT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH