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TMI Blog2008 (5) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for the asst. yr. 2001-02, it was noticed by the AO that the assessee company has claimed depreciation on assets written off of Rs. 4,71,51,016 on 31st Dec., 1999. These appeals (sic-assets) were capitalized at Rs. 4,71,51,016 as on 1st Nov., 1996. The WDV as on the end of the immediate preceding financial year ended on 31st March, 1999 was Rs. 2,32,07,141. The depreciation claimed during this year under consideration was of Rs. 58,01,785 on the aforesaid assets written off in the year under consideration. The AO had a reason to believe that the excess depreciation of Rs. 58,01,785 claimed on the assets, which were written off in the books, was not allowable inasmuch as the assets which were written off could not be put to use after the same having been written off. However, the depreciation to that extent was claimed and allowed in the original assessment completed under s. 143(3) of the Act. The AO, therefore, after having recorded reasons, reopened the assessment under s. 147 of the Act and issued notice under s. 148 to the assessee, in compliance of which the assessee filed return of income on 24th Sept., 2004 disclosing net loss at Rs. (-) 51,78,95,964. 6. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes the price for which such building, machinery. plant or furniture is sold. The expression "moneys payable" has to be interpreted only as actual money payable in cash or by cheque or draft and not any other thing or benefit which can be converted in money. In support of this proposition, the learned counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Kasturi Sons Ltd. (1999) 153 CTR (SC) 1 : (1999) 103 Taxman 342 (SC). He therefore, submitted that although the assessee company discarded certain assets, since the assets were not disposed of or sold during the relevant financial year. nothing on that account can be reduced from the WDV of the block of assets brought forward from immediate preceding assessment year and, hence. the depreciation claim made by the assessee is admissible on the WDV of the entire block of assets. He, therefore, submitted that the AO's action in reducing the entire WDV of the assets, which were discarded during the year from the block of the assets is not in conformity with the scheme of depreciation allowable under s. 32(1) of the Act r/w s. 43(6) of the Act. He further submitted that what was actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in substituting asset-wise depreciation by block depreciation by pulling (sic-pooling) the assets entitled to same rate of depreciation w.e.f. 1st April, 1988. In other words, the change made in s. 32(1) of the Act was to substitute a portion of depreciation on block of assets inspite of depreciation on every item or building, machinery, plant or furniture. The base for depreciation would be with reference to the WDV so that the entire concept of depreciation was to be understood on this basis. The Expln. 2 to s. 32 provides that for the purpose of s. 32(1) of the Act "WDV of the block of assets" shall have the same meaning as in cl. (c) of sub-s. (6) of s. 43 of the Act. The expression "block of assets" has been defined in s. 2(11) of the Act stating that "block of assets" means a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed. Clause (c) of sub-s. (6) of s. 43 gives meaning of "WDV' in respect of any block of assets. Sub-cl. (ii) of cl. (c) of sub-s. (6) of s. 43 defines the meaning of WDV in the case of any block of assets in respect of any previous year rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sum so arrived at shall be reduced by the sale proceeds and other amounts receivable by the assessee in regard to any asset falling within that block which is sold, discarded, demolished or destroyed during that previous year. 15. In this connection we may refer to a decision of Tribunal, Delhi Bench 'A' in the case of Asstt. CIT vs. SRF Ltd. (2008) 21 SOT 122 (Del) (the AM in this Bench was the author of the said decision) has held as under: "7. We have considered rival submissions. Under s. 32(1) depreciation on certain assets owned and used for the purpose of business is allowable and the same is allowable at the prescribed percentage on the WDV of block of assets, which comprises various assets entitled to same rate of depreciation. Thus, the ownership and user both are the criteria for claim of depreciation. However, the user criteria is to be fulfilled at the time when the asset is to form part of block of assets. Once the assets are part of block of assets, it looses its individual cost or WDV. In a way it looses its identity. Thereafter the depreciation is allowable on the entire block of assets. In the present case, it is seen that the assets of international divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin that block, which is sold or discarded or damaged or destroyed during the relevant year under consideration together with the amount of scrap value, if any, so, however, that amount of such deduction does not exceed of the WDV of the block of assets as so increased. With regard to the determination of the amount on account of assets which have been discarded and written off in the year, by which the WDV of block of assets is to be reduced for the purpose of depreciation allowable under the Act. It is an admitted position that no money was payable in respect of the assets written off during the year. However, the amount of scrap value of the assets which has been discarded and written off in the year under consideration, is invariably to be reduced from the WDV as provided in s. 43(6) of the Act. The AO has reduced the WDV of a block of assets by WDV of individual assets, by working out the same on the basis of asset-wise depreciation which is, in our opinion, not in the manner provided in s. 43(6)(c) of the Act. What can be reduced from WDV of a block of assets in the present case is only the scrap value of the assets, which have been discarded during the year under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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