M/S.T.C.M. LTD. vs. THE COMMISSIONER OF INCOME TAX, KOCHI

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ITA/19/2012HC KeralaKLHC01023941201223 February 2012Author: HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the fundamental principle for claiming depreciation is for wear and tear resulting from the use of assets in business. Since the plant and machinery were located in a defunct unit, they were not being put to use. Consequently, the Tribunal was correct in declining the depreciation claimed on the part of the block of assets that were not used in the business. The court found no merit in the delay condonation petition and the appeal itself. Therefore, both the delay petition and the appeal were dismissed. The ratio decidendi is that depreciation is admissible only for assets in active use for business purposes, and not for those in a defunct unit.

What were the facts?

The assessee, M/s. T.C.M. Ltd., filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The appeal was filed with a delay of 206 days. The core issue concerned the disallowance of depreciation claimed on plant and machinery located in a defunct unit. The Assessing Officer had disallowed the depreciation, a decision upheld by the Commissioner of Income Tax (Appeals) and subsequently by the ITAT. The High Court considered both the delay petition and the appeal on its merits.

What were the issues?

1. Whether the assessee is entitled to claim depreciation on plant and machinery in a defunct unit (Question of law). Assessee's Contention: The judgment does not record any specific contentions made by the assessee regarding the allowability of depreciation on assets in a defunct unit. The appeal itself was filed against the ITAT's order disallowing the claim. Revenue's Contention: The revenue's position, as upheld by the lower authorities and the Tribunal, was that depreciation is a deduction for wear and tear due to use, and therefore, assets in a defunct unit, not being put to use, are not eligible for depreciation. The judgment does not explicitly detail the revenue's arguments before the High Court, but it reflects their stance that prevailed.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH THURSDAY, THE 23RD DAY OF FEBRUARY 2012/4TH PHALGUNA 1933 ITA.No. 19 of 2012 () --------------------- [ITA. NO. 454/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH] APPELLANT/ASSESSEE/APPELLANT: ----------------------------- M/S.T.C.M. LTD., PB NO. 19, KALAMASSERY 683104. PRESENTLY AT 32/1111 SNIGDHA, CHATHANGAT CROSS ROAD, PALARIVATTOM, COCHIN-25 REPRESENTED BY ITS MANAGING DIRECTOR, JOSEPH VARGHESE. BY ADVS.SRI.C.K.KARUNAKARAN SMT.T.P.LEKSHMI VARMA SRI.ANOOP JOSE (PALAMATTOM) SRI. P. BALAKRISHAN RESPONDENT/REVENUE/RESPONDENT: ----------------------------- 1 THE COMMISSIONER OF INCOME TAX, KOCHI. R1 BY SRI. JOSE JOSEPH, SC THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: DST ITA.No. 19 of 2012 () --------------------- APPENDIX PETITIONER'S ANNEXURES :- ANNEXURE A: COPY OF THE ASSESSMENT ORDER DATED 20.12.2006 OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2004-05. ANNEXURE B: COPY OF THE ORDER DATED 12.12.2007 OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI. ANNEXURE C: COPY OF THE ORDER DATED 14.03.2011 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA NO. 454/COCH/2008. RESPONDENTS' EXHIBITS : NIL // TRUE COPY// P.A. TO JUDGE DST C.N. RAMACHANDRAN NAIR & BABU MATHEW P. JOSEPH, JJ. ------------------------------------------------------------ C.M.Appl. No. 86 of 2012 & I.T.A. No. 19 of 2012 ------------------------------------------------------------- Dated this the 23rd day of February, 2012

JUDGMENT Ramachandran Nair, J. Appeal is filed with a delay of 206 days. While considering the delay petition, we have also heard the case on merit. The only issue raised is against disallowance of depreciation in respect of plant and machinery consisting of block of estate in a defunct unit. The basic concept for depreciation is deduction for wear and tear for use. Obviously, the assets in defunct unit are not entitled to depreciation as those are not put to use. Consequently, the Tribunal, in our view, rightly declined the depreciation claimed on part of block of assets not used in business.

[I.T.A.No.19/2012] 2 2. We, therefore, do not find any merit in the delay condonation petition as well as the Appeal. Consequently, both are dismissed. C.N. RAMACHANDRAN NAIR, JUDGE BABU MATHEW P. JOSEPH, JUDGE. krs.

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