Depreciation disallowed when entire asset block not put to use during the year. The Claim that asset once entered block, depreciation should be allowed dismissed by ITAT
ABCAUS Case Law Citation:
958 2016 (06) ITAT
Assessment Year: 2007-08
Date of Judgment/Order: June, 2016
Brief Facts of the Case:
The assessee company filed the return of income declaring a loss. The return was processed u/s.143(1) and later it was selected for scrutiny by issuance of notice u/s.143(2). The AO noticed that the assessee had claimed depreciation on the plant and machinery and factory shed. However, on perusal of it Profit and Loss Account, it was observed that the only income credited was on account of commission.and there was no other credit to the Profit & Loss Account to show the assessee’s involvement in any manufacturing activity. The Assessing Officer was of the view that the Plant & Machinery and factory shed were for manufacturing purpose. Therefore, for want of fulfillment of basic condition of use of asset being Plant & Machinery and factory shed, for the purpose of business, the assessee’s claim for depreciation was disallowed.
The assessee went in appeal CIT(A) who confirmed the said disallowance. Feeling aggrieved the assessee filed the present appeal before ITAT.
The assessee company argued that since the related asset had entered the block therefore the claim of the deprecation was required to be allowed in the interest of justice. In support of this contention of the assessee has placed reliance on the following case laws:
Commissioner of Income Tax Vs. M/s. Sonic Biochem Extractions Pvt. Ltd. (Bombay High Court) and
Commissioner of Income Tax Vs. Travancore Chemicals & Mfg. Co. Ltd. (Kerala High Court)
The ITAT Observed that case laws relied by the assessee talked about the running of business where one particular machinery was not used in the relevant assessment year. Whereas in the instant case the business of the assessee is not running from the relevant assessment year and plant and machinery were not put to use for business purpose. In the assessee’s case the entire block of asset was not put to use during the year and it was not the question of individual asset being used or not. Accordingly the Tribunal upheld the disallowance.
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