{"id":2568,"date":"2011-01-16T12:24:19","date_gmt":"2011-01-16T06:54:19","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=2568"},"modified":"2011-01-16T12:24:19","modified_gmt":"2011-01-16T06:54:19","slug":"cit-vs-oswal-agro-mills-ltd-delhi-high-court-despite-non-user-of-asset-depreciation-admissible-if-it-is-part-of-block-of-assets","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cit-vs-oswal-agro-mills-ltd-delhi-high-court-despite-non-user-of-asset-depreciation-admissible-if-it-is-part-of-block-of-assets\/","title":{"rendered":"CIT vs. Oswal Agro Mills Ltd (Delhi High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (oswal_agro_depreciation.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n

Despite non-user of asset, depreciation admissible if it is part of \u201cblock of assets\u201d
\n<\/strong><\/p>\n

The assessee claimed depreciation u\/s 32 in respect of the assets of its Bhopal unit which was closed for 6 years<\/em><\/strong>. The claim was on the basis that (i) despite closure of the unit there was a \u201cpassive user<\/strong>\u201d of the assets and that (ii) even assuming there was no user, as the assets were part of the \u201cblock of assets<\/strong>\u201d, deprecation could not be disallowed. The AO & CIT (A) rejected the claim though the Tribunal upheld it. On appeal by the department, HELD dismissing the appeal:<\/p>\n

(i) The argument of the assessee that despite closure of the unit for 6 years there should be deemed to be \u201cpassive user<\/em>\u201d is not acceptable<\/strong> as then the words \u201cused for the purpose of business<\/em>\u201d will lose their sanctity and become superfluous. The fact that the assessee is striving to make the unit viable does not provide justification to claim depreciation when actual non-user remained for number of years;<\/p>\n

(ii) However, pursuant to the insertion of the concept of \u201cblock of assets<\/em>\u201d w.e.f. 1.04.1988, depreciation is allowable on the WDV of the \u201cblock of assets<\/em>\u201d and individual assets lose their identity<\/strong><\/em> upon introduction into the block. The department’s argument that user of each and every asset is essential is not acceptable because it would mean that the assessee has to maintain the details of each asset separately and this would frustrate the very purpose for which the amendment was brought about<\/em>. The Revenue is not put to any loss by adopting such method because when the asset is sold, it results in taxable STCG. <\/p>\n

\nSee also CIT vs. Bharat Aluminium<\/a><\/strong> (Delhi High Court), CIT vs. G. R. Shipping<\/a><\/strong> (Bombay High Court) & Swati Synthetics vs. ITO<\/a><\/strong> 38 SOT 208 (Mum) on the same point. <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Pursuant to the insertion of the concept of \u201cblock of assets\u201d w.e.f. 1.04.1988, depreciation is allowable on the WDV of the \u201cblock of assets\u201d and individual assets lose their identity upon introduction into the block. The department’s argument that user of each and every asset is essential is not acceptable because it would mean that the assessee has to maintain the details of each asset separately and this would frustrate the very purpose for which the amendment was brought about. The Revenue is not put to any loss by adopting such method because when the asset is sold, it results in taxable STCG<\/p>\n

Read more ›<\/a><\/div>\n

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