The respondent assessee had claimed depreciation in respect of its machinery valued at Rs.16.96 lacs which was used in its business of refining edible oil. The machinery had not been used during the assessment year as the respondent has discontinued its business of refining edible oil. The above depreciation was claimed on the block of assets on the written down value including the refining edible oil machinery. The Assessing Officer disallowed the claim of depreciation on the ground that one of the twin requirements of ownership and user under Section 32(1)(ii) of the Act viz. user was not satisfied.
On appeal the Commissioner of Income Tax (Appeals) held that in the absence of the Machinery being put to use and the business of Refining edible oil having been discontinued, the respondent is not entitled to depreciation.
On further appeal to the Tribunal the impugned order held that the refining machinery was a part of the block of assets of plant and machinery. In such a case depreciation is granted to the entire block of assets whether or not an individual item therein has been used during the subject assessment year.
Mrs. Bharucha, learned Counsel for the revenue fairly states that the issue arising herein is identical to the issue which arose before the Tribunal in Boskalis Dredging India (supra) where also the dredger concerned was a part of the block of assets and not put to use. On instructions, she further states that the Revenue has accepted the decision of the Tribunal in DCIT Vs. Boskalis Dredging India (P) Ltd. 53 SOT 17 (Mum) which the impugned order has merely followed. No distinguishing feature in the present facts has been pointed out which would warrant taking a different view. Besides the Tribunal in its order in Boskalis Dredging India (supra) placed reliance upon the decision of this Court rendered in an appeal filed by the Revenue in G. R. Shipping Ltd. being Income Tax Appeal No. 598 of 2009 which was dismissed on 20.07.2008 upholding the view of the Tribunal on identical issue.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 2088 OF 2013
Commissioner of Income Tax
Vs.
M/s. Sonic Biochem Extractions Pvt. Ltd.
Mrs. S. V. Bharucha for the Appellant.
Mr. K. Shivram, Sr. Counsel a/w. Mr. Rahul Hakani for the Respondent.
CORAM : M.S.SANKLECHA & G.S. KULKARNI, JJ.
DATE : 17th NOVEMBER, 2015.
P.C.
1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (Act) challenges the order dated 20.03.2013 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order relates to the Assessment Year 200506.
2. The appellant has raised the following questions of law for our consideration:
(a) “Whether on the facts and circumstances of the case the Tribunal is justified in holding that the assessee is eligible to claim depreciation in respect of plant & machinery of discontinued business without appreciating the fact that the basic condition for claiming depreciation u/s. 32 of the Act is the “use of asset” for business purpose of the assessee?
(b) Whether on the facts and circumstances of the case the Tribunal was correct in holding the plant and machinery of discontinued business, which is not likely to be revived, in a block of asset with written down value is eligible for claim of depreciation?
(c) Whether on the facts and circumstances of the case the Tribunal is justified in setting aside the issue of assessee’s claim of “loss due to fire” to the file of the Assessing Officer without properly appreciating the fact that the loss is attributable to the fixed asset?”
(d) Whether on the facts and circumstances of the case the Tribunal is justified in upholding the method adopted by the assessee to devalue the closing stock from Rs.14,25,705/ to Rs.1/ without appreciating the fact that this method is contrary to the provisions of section 145A and also the accounting standard?”
3. Re: question Nos.(a) & (b) :
(a) The respondent assessee had claimed depreciation in respect of its machinery valued at Rs.16.96 lacs which was used in its business of refining edible oil. The machinery had not been used during the assessment year as the respondent has discontinued its business of refining edible oil. The above depreciation was claimed on the block of assets on the written down value including the refining edible oil machinery. The Assessing Officer disallowed the claim of depreciation on the ground that one of the twin requirements of ownership and user under Section 32(1)(ii) of the Act viz. user was not satisfied.
(b) On appeal the Commissioner of Income Tax (Appeals) held that in the absence of the Machinery being put to use and the business of Refining edible oil having been discontinued, the respondent is not entitled to depreciation. Thus the order of the Assessing Officer was undisturbed to the extent it disallowed depreciation of Rs.16.96 lacs.
(c) On further appeal to the Tribunal the impugned order held that the refining machinery was a part of the block of assets of plant and machinery. In such a case depreciation is granted to the entire block of assets whether or not an individual item therein has been used during the subject assessment year. In support the impugned order placed reliance upon its decision in the case of DCIT Vs. Boskalis Dredging India (P) Ltd. 53 SOT 17 (Mum) wherein it has been held that once the concept of block of assets was brought into effect from assessment year 1989-90 onwards then the aggregate of written down value of all the assets in the block at the beginning of the previous year along with additions made to the assets in the subject Assessment Year depreciation is allowable. The individual asset looses its identity for purposes of depreciation and the user test is to be satisfied at the time the purchased Machinery becomes a part of the block of assets for the first time. In the circumstances the respondent’s appeal was allowed and the disallowance of depreciation was deleted.
(d) Mrs. Bharucha, learned Counsel for the revenue fairly states that the issue arising herein is identical to the issue which arose before the Tribunal in Boskalis Dredging India (supra) where also the dredger concerned was a part of the block of assets and not put to use. On instructions, she further states that the Revenue has accepted the decision of the Tribunal in Boskalis Dredging India (supra) which the impugned order has merely followed. No distinguishing feature in the present facts has been pointed out which would warrant taking a different view. Besides the Tribunal in its order in Boskalis Dredging India (supra) placed reliance upon the decision of this Court rendered in an appeal filed by the Revenue in G. R. Shipping Ltd. being Income Tax Appeal No. 598 of 2009 which was dismissed on 20.07.2008 upholding the view of the Tribunal on identical issue. Moreover it is clarified by the counsel that the refining machinery has itself been sold during the next year.
(e) In the above view question Nos.(a) & (b) as formulated do not give rise to any substantial questions of law. Accordingly not entertained.
