PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. BABUL PRODUCTS P. LTD.

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) C/TAXAP/734/2018 JUDGMENT [1.0] Feeling aggrieved and dissatisfied with the impugned order passed by the learned Income Tax Appellate Tribunal Bench “A”, Ahmedabad (hereinafter referred to as “the learned Tribunal”) dated 09/10/2017 in ITA No.553/Ahd/2014 for the Assessment Year 2009-10 by which the learned Tribunal has allowed the said Appeal preferred by the assessee and deleted the addition made on account of disallowance of depreciation of Rs.334,03,491/- made by the learned Assessing Officer confirmed by the learned CIT(A) on account of contravention of provisions of Section 32 of the Income Tax Act and deleted the addition of Rs.54,24,294/- made by the learned Assessing Officer under Section 41(1) of the Income Tax Act on account of cessation of liability, revenue has preferred the present Tax Appeal with the following proposed questions of law; (a) “Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made on account of disallowance of depreciation of Rs.34,03,491/- which is in contravention of the provision of Section 32 of the Act?” (b) “Whether the Appellate Tribunal has erred in law and on facts in deleting addition of Rs.54,24,294 made u/s 41(1) of the Act on account of cessation of liability?” [2.0]

We have heard Mrs Mauna Bhatt, learned advocate appearing on behalf of the revenue. So far as proposed question no.(a) is concerned, learned Assessing Officer C/TAXAP/734/2018 JUDGMENT disallowed the depreciation claimed by the assessee of Rs.34,03,491/- on the ground that the factory of the assessee is closed, and therefore, the assessee is not using the assets for which the depreciation was claimed, and therefore, the assessee shall not be entitled to the depreciation under Section 32 of the Income Tax Act. However, considering the fact that the assessee was in business however could not run the factory in the year under consideration because of the stay order granted by the Court and even otherwise, the business of the assessee was continued, and therefore, the learned Tribunal allowed the claim of the assessee of depreciation under Section 32 of the Income Tax Act by observing that it cannot be said that the assessee stopped /closed the business, we are in complete agreement with the view taken by the learned Tribunal. [3.0] Now so far as proposed question no.(b) is concerned, the same is squarely covered against the revenue in view of the decision of the Hon’ble Supreme Court in the reported in [2018] 93 taxmann.com 32(SC). The factual matrix, which came to be considered by the learned Tribunal is that the learned Tribunal while deleting the addition made under Section 41(1) of the Income Tax Act on account of cessation of the liability, namely, the assessee had not written off the liability in the books of accounts, and therefore, the liability with respect to debtors is not ceased is concerned, considering the aforesaid factual matrix and when in the books of accounts the assessee carried forward and continued the liability and has not written off, no error has been committed by the learned Tribunal in deleting the addition of C/TAXAP/734/2018 JUDGMENT Rs.54,24,294/- made by the learned Assessing Officer under Section 41(1) of the Income Tax Act on account of cessation of liability. [4.0]

In view of the above and for the reasons stated hereinabove, no substantial question of law arises in the present Tax Appeal and hence the present Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R. SHAH, J.) (A.Y. KOGJE, J.) siji