Depreciation can be claimed on assets not in use, once they are a part of block of assets: ITAT Kolkata

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Depreciation can be claimed on assets not in use, once they are a part of block of assets: ITAT Kolkata 

M/s. Beeyu Overseas Ltd. (ITA No.409/Kol/2020)

Facts:

  1. The AO noticed from the Director’s report that assessee is not carrying out any tea manufacturing activity at its unit located at Ooty, Tamilnadu since August, 2008 as the Tea Board of India had revoked the factory’s registration under the provisions of Tea (Marketing) Control Order, 2003.
  1. AO sought clarification from the assessee as to why the claim of depreciation should not be disallowed when the plant and machinery were not in use.
  1. The assessee maintained that, while allowing depreciation U/S 32 of the Income Tax Act, bifurcation of block of asset is not permitted.
  1. AO declined to accept the submission of the assessee and disallowed the claim of depreciation made by the assessee.

Note: 

  1. As per the amended section 32 of the Act, the depreciation is allowed on block of assets.
  2. ‘Block of assets’ is defined by section 2(11), according to which block of assets means, group of assets falling within a class of assets.
  3. With the aforesaid amendment, the depreciation is allowed on the written down value of the block of assets at such percentage as may be prescribed.
  4. Further, individual assets have lost their identity.

ITAT Kolkata held as below:

  1. This is not a case where we need to deal with the issue of whether assets have been put to use or not so as to form part of the block of assets in their first year. It is not the case of AO that the assets were not put to use at all. Once the assets have been put to use, the claim of depreciation allowance on the said assets cannot be restricted.
  1. Once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in subsequent years on the ground that one of the assets is not used by the assessee in some of the years.
  1. The AO is directed to allow the claim of depreciation. Accordingly, the ground of appeal is allowed.

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