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TMI Blog2019 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in illegal mining activity and for this reason, the mining license is cancelled. This is not the case of the AO that the assets in question cannot be used by the assessee in some other business. In fact, this is admitted by the AO also that part assets of these two blocks are being used for business purpose and AO himself allowed part depreciation for each of these two blocks. Some assets of a block of assets are not used in a particular year, whether for allowing depreciation, we have to ensure that each item of the block of assets was used for business purpose. In our humble opinion, this is not the requirement of law that in the block of assets concept, business use of each of the assets of the block has to be seen and examined and depreciation is to be allowed only in respect of the assets used. We note that in this case, one of the assets is not even owned by the assessee because it was sold out but still, depreciation is allowable on WDV less sale proceeds. Hence, it is clear that business use of each item of a block of assets is not necessary for allowing depreciation on the block. We therefore delete the disallowance of depreciation made by the AO by respectful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has also noted that assessee has income only from contract receipts for transportations and rake loading charges. Thereafter the AO has noted that the assessee was issued show cause notice asking the assessee to explain as to why the depreciation should not be disallowed on the Plant and Machinery and Building which is not utilized for the purpose of business. The assessee submitted reply vide letter dated 05.12.2016 received by the AO on 06.12.2016 which is reproduced by the AO in Para 3.2 of the assessment order. In the said written submissions, the assessee has placed reliance on the judgement of Hon ble Madras High Court rendered in the case of CIT Vs. Southern Petrochemical Industries Corpn. Ltd. as reported in 301 ITR 255. He also placed reliance on the judgement of Hon'ble Karnataka High Court rendered in the case of CIT Anr Vs. Blend Well Bottles (P) Ltd. as reported in 323 ITR 18. Reliance is also placed on another judgement of Hon ble Madras High Court rendered in the case of CIT Vs. Southern Hydro Carbon Ltd. as reported in 146 CTR 55. The AO held that these judgements are not applicable in the present case because the facts are different. The AO has noted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO, (2010) 38 SOT 0208 (Mumbai Trib.) 5. We have considered the rival submissions. First of all, we reproduce the details of depreciation amount of ₹ 3,88,36,290/- for which disallowance has been made by the AO and these details are available on page no. 6 of the order of CIT(A) and hence, the same are reproduced hereinbelow for ready reference. Particulars Rate Depreciation (Rs.) Block I Mine Building Borewell 10% 2,25,654 Mine Development Expenses 10% 2,78,757 Building @ RNPR 10% 47,97,054 Block - IV Plant Machinery 15% 2,46,20,415 15% 74,44,638 33 KV Power Line (Ranjithpura) 15% 14,69,772 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 5,85,98,656 7. From the above two charts, it is seen that out of building block, disallowance has been made in respect of Mine Building Borewell of ₹ 2,25,654/-, Mine Development Expenses of ₹ 2,78,757/-, Building @ RNPR of ₹ 47,97,054/- but no disallowance was made out for Railway siding Building for which the assessee has claimed depreciation of ₹ 10,58,750/- and this stands fully allowed by the AO out of 10% depreciation block. Out of plant and machinery 15% block, the AO has made disallowance of total amount of ₹ 2,46,20,415 ₹ 74,44,638/-. Similarly in respect of 33 KV Power Line (Ranjithpura) 15% block also, the AO has made total disallowance of the claim of ₹ 14,69,772/-. In respect of Railway siding tracks 15% block and Railway siding Weigh bridge 15% block, the claim of the assessee for depreciation of ₹ 1,75,93,266/- and ₹ 1,74,616/- respectively was allowed by the AO. Hence it is seen that disallowance has been made by the AO in respect of two blocks i.e. 10% building block, 15% plant and machinery block and in both these blocks, depreciation has been allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold or discarded or demolished or destroyed during that previous year as provided in ss. 43(6)(c)(i)(b) and 32(1)(iii) of the Act. (2) An asset not exclusively used for the purposes of the business or profession but used other than business purposes as provided in s. 38(2) of the Act. (3) where any block of assets does not cease to exist but the full value of the consideration received or accruing as a result of the transfer of the depreciable assets by the assessee during the previous year exceeds the aggregate of the amounts stated in s. 50 of the Act and where any block of assets ceases to exist for the reason that all the assets in that block are transferred during the previous year. 9. From the above Para reproduced from this Tribunal order, it is seen that it is held by the Tribunal that the existence of individual asset in block of assets itself amounts to use for the purpose of business. The Tribunal also held that used for the purpose of business as provided in section 32 (1) of IT Act for the concept of depreciation on block of assets can be summarized by saying that use of individual asset for the purpose of business can be examined only in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of these two blocks are being used for business purpose and AO himself allowed part depreciation for each of these two blocks. Now the question is this that if some assets of a block of assets are not used in a particular year, whether for allowing depreciation, we have to ensure that each item of the block of assets was used for business purpose. In our humble opinion, this is not the requirement of law that in the block of assets concept, business use of each of the assets of the block has to be seen and examined and depreciation is to be allowed only in respect of the assets used. One example will clarify our opinion. Suppose, there is an asset with W.D. V. of ₹ 10 Lacs included in a block of Assets of ₹ 100 lacs and the same is sold for ₹ 5 lacs. In that situation, the amount of sale proceeds received ₹ 5 lacs has to be reduced from the block i.e. ₹ 100 lacs and on the balance amount of the block i.e. ₹ 95 lacs, depreciation is to be allowed. We note that in this case, one of the assets is not even owned by the assessee because it was sold out but still, depreciation is allowable on WDV less sale proceeds. Hence, it is clear that business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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