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Depreciation allowable even if asset not used at all for entire year
The assessee, engaged in shipping business, owned a barge which was included in the block of assets. The barge met with an accident and sank on 6.3.2000 (AY 2000-01). As efforts to retrieve the barge were uneconomical, the barge was sold on as-is-where-is in May 2001 (AY 2002-03). As the barge was non-operational and not used for business at all in AY 2001-02, the AO denied depreciation. The CIT (A) upheld the stand of the AO. On appeal by the assessee, the Tribunal took the view that after the insertion of the concept of “block of assets” by the T. L. (A) Act, 1988 w.e.f 1.4.1988 individual assets had lost their identity and only the “block of assets” had to be considered. It was held that the test of “user” had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the High Court dismissed the appeal holding that the issue was squarely covered in favour of the assessee by its earlier judgements in Whittle Anderson 79 ITR 613 and G. N. Agrawal 217 ITR 250.
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