2017 (8) TMI 1704 - AT - Income Tax

Depreciation claim - plants of such units which stood completely closed for the last 8 years as stated in the annual report - HELD THAT - None of the parties before us have unfolded the actual assets their WDV etc. on which the depreciation was claimed or disallowed. As a matter of fact the dispute still remains whether the units on assets of which the assessee claimed depreciation were completely closed for ever or were kept stand by after temporary suspension of production. The assessee has not produced any material before us that the said units were kept stand by. Rather it has also been contended on behalf of assessee before us that though as per BIFR order those non-operative units were supposed for sale but no action has been taken so far on account of pending approval from the Government of India. All these facts need proper examination at the level of AO before deciding the eligibility of the impugned assets for depreciation u/s. 32. We accordingly remit the matter back to the file of AO for deciding the issue afresh in the light of observations made in the body of this order above. Assessee appeal is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of depreciation on assets of closed units.
2. Interpretation of provisions of Section 32 of the IT Act.
3. Requirement for assets to be put to use for claiming depreciation.
4. Admissibility of depreciation on entire block of assets.

Analysis:
The Tribunal initially dismissed Revenue's appeals, leading to a challenge in the High Court. The High Court directed the Tribunal to reconsider the issue of depreciation claimed by the Assessee. The main issue revolved around whether the Assessee was entitled to depreciation on assets of units reported as closed. The Assessing Officer disallowed depreciation based on the closure of certain units. The Assessee argued that even if some units were closed, depreciation should be allowed on the entire block of assets. The Tribunal noted conflicting contentions by both parties and the lack of detailed information on assets claimed for depreciation. The Tribunal emphasized the need for a thorough examination by the Assessing Officer to determine if the units were permanently closed or temporarily suspended. The Assessee was directed to provide complete details to establish the status of the units. The matter was remitted back to the Assessing Officer for a fresh decision, considering relevant legal precedents and the requirement for assets to be put to use for claiming depreciation.

The Departmental Representative supported the disallowance of depreciation on closed plants, citing a Supreme Court decision. On the other hand, the Assessee's Counsel argued for allowing depreciation on the entire block of assets, referencing relevant case laws. The Tribunal observed that the dispute centered on whether the units were permanently closed or temporarily suspended. The lack of detailed information on assets claimed for depreciation created ambiguity. The Tribunal stressed the importance of verifying the status of the units before deciding on the eligibility of assets for depreciation under Section 32 of the IT Act.

The Tribunal highlighted the necessity for the Assessing Officer to examine all relevant facts, including the status of non-operative units and the assets claimed for depreciation. The Tribunal emphasized the requirement for the Assessee to furnish complete details and evidence to support their contentions. The decision-making process was to consider legal precedents and the need for assets to be put to use for claiming depreciation. The Tribunal remitted the matter back to the Assessing Officer for a fresh decision, ensuring the Assessee receives a fair hearing. The appeal was allowed for statistical purposes, emphasizing the need for a comprehensive reevaluation of the issue of depreciation on assets of closed units.

In conclusion, the Tribunal's judgment focused on the proper examination of facts, the requirement for assets to be put to use for claiming depreciation, and the interpretation of relevant legal provisions and precedents. The case highlighted the importance of providing detailed information and conducting a thorough assessment before determining the eligibility of assets for depreciation.