The Commissioner of Income Tax vs Sonal Gum Industries

D.A. Mehta, J.—Income Tax Appellate Tribunal, Ahmedabad Bench ''A'' (the Tribunal) has referred the following question u/s 256(2) of the Income Tax Act, 1961 (the Act) at the instance of the applicant-revenue for Assessment Year 1988-89:

Whether the appellate Tribunal is right in law and on facts in confirming the order passed by the Dy C.I.T. (Appeals) directing the Assessing Officer to grant depreciation in view of the fact that concept of block of assets had been inserted in the Act, when the assets were not used in the year?

Heard the learned advocate for the applicant-revenue. She has reiterated the stand taken by the Assessing Officer in the assessment order to assail the impugned order dated 16.05.1997 made by the Tribunal.

Though served none appears for the respondent-assessee.

As can be seen from the concurrent findings recorded, both by Commissioner (Appeals) and the Tribunal, the assessee is an old assessee who has been carrying on the same business with the same assets on which depreciation had been allowed in past. The record reveals that the reason advanced by the Assessing Officer for rejecting the depreciation is that entire factory building and all the items included in the block of plant & machinery were not actually put to use during the year under consideration. Deputy Commissioner (Appeals) has found that since Assessment Year 1988-89 depreciation is allowable on all assets falling within a block of assets as mentioned in Appendix-I of the Income Tax Rules, 1962. It has further been held that in light of the amended provisions w.e.f. Assessment Year 1988-89 individual items included in the block are not to be considered separately for the purposes of granting depreciation. This view has been confirmed by the Tribunal.

It is not possible to find any legal infirmity in the aforesaid view adopted by the first appellate authority and confirmed by the Tribunal. In fact the assessment order itself reveals that it is not the case of the Assessing Officer that the assets were not put to use at all. Once the factory building is put to use it is not possible to restrict the depreciation on the said building by stating that only a portion thereof has been put to use. Similarly 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. Once it is found that the assets are used for business, it is not necessary that all the items falling within plant & machinery have to be simultaneously used for being entitled to depreciation.

In the result, in absence of any error committed by the Tribunal, the question, referred for the opinion of this Court, is answered in the affirmative i.e. in favour of the assessee and against the revenue. The reference stands disposed of accordingly with no order as to costs.