JABIL CIRCUIT INDIA P. LTD.,MUMBAI vs. PR. CIT -3, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S. RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No.349/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2013-14) Jabil Circuit India Pvt. Ltd. बिधम/ PCIT-03, Mumbai Arena House, 3rd Floor, Plot Room No. 612, 6th Floor, Vs. No. 103 Road No. 12, Opp Aayakar Bhavan, Tulip Telecom Marol Maharishi Karve Road, MIDC, Andheri (E), Mumbai-400020. Mumbai-400093. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AACCP7114K (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: Shri Nitesh Joshi Revenue by: Shri Ankush Kapoor (CIT DR) सुनवाई की तारीख / Date of Hearing: 23/01/2024 घोषणा की तारीख /Date of Pronouncement: 08/02/2024 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the revision order of the Ld. Principal Commissioner of Income Tax-03, [hereinafter referred to as the “PCIT”], Mumbai dated 18.01.2021 for assessment year 2013-14 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. 3. The assessee challenges the usurpation of revisional jurisdiction u/s 263 of the Act by Ld. PCIT by contending inter-alia that Ld. PCIT without satisfying the condition precedent for invoking the revisional jurisdiction has erred in assuming such a jurisdiction. Therefore, the impugned action of Ld. PCIT is wholly without jurisdiction and consequently, it is ab-initio void.

“a. That the PCIT was not justified in invoking his revisionary jurisdiction under section 263 of the Act for revising the assessment order which had been passed under section 143(3) read with section 144C(13) of the Act in conformity with the directions of the DRP. The said proposition is supported by Order of the Tribunal in the case of Barclays Bank Pic v. CIT(IT).

b. That the said assessment order had been admittedly passed by the AO after due application of mind. Hence, the said order did not fulfill the requirement of being erroneous in nature. Further, on the facts and in the circumstances of the present case and in law, the assessee was entitled to depreciation even though the Chennai unit was non-functional. In the least, this was an issue on which two views were permissible and the AO having taken a possible view, the assessment order also could not be regarded as prejudicial to the interests of the Revenue - Grounds 2 to 4 of the appeal.

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. c. In the assessment order, the AO had inter alia made ‘Disallowance of expenses of discontinued business’ (being revenue expenses relatable to the Chennai unit - see pages 221 and 222 of the Factual PB). Against this, the Assessee had filed an appeal before the Tribunal which came to be disposed of on 19.11.2018. Hence, clause (c) of Explanation 1 below section 263(1) of the Act would be applicable to the present case and disallowance of depreciation relating to the said unit, which is also a disallowance in view of discontinued business, would constitute a subject matter of appeal before the Tribunal acting as a bar on the PCIT in exercising jurisdiction under section 263 of the Act. In this regard, orders/ judgments referred to at Sr. Nos. 34 to 46 at pages 616 to 718 of the Legal Paper Book and dealing with meaning to be given to the expression ‘subject matter of appeal’ would be relevant - Additional ground of appeal filed on 21.12.2021.”

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. supplied products to M/s. Nokia. According to him, there is no dispute that the factory building, plant and machinery and furniture and fixtures relating to the said units formed part of the respective block of assets. According to him, since M/s. Nokia had to close down its factory at Chennai and for other reasons, the assessee’s management decided to suspend its manufacturing operations at the Chennai unit. However, it continued to claim depreciation on the written down value of the block of assets which also included the assets relating to the Chennai unit. According to him, the assessee filed its return of income for assessment year 2013-14 i.e. the relevant year under consideration declaring total income of Rs.138,44,07,400/- as per the normal provisions of the Act. And in the return of income, it has claimed depreciation of Rs.30,10,69,631/- of which the relevant schedule in the Form of return of income is found placed at page no. 98 and 99 of the PB. A bare perusal thereof shows that, there are two block of assets insofar as plant and machinery is concerned based on the rate of depreciation applicable to the relevant group of such plant and machinery being 15% and 60%. Apart therefrom, there is a block of asset for building and a separate block for the furniture and fittings. The said block of assets relates to the assessee as a whole and is not concerned with the three separate units. During the year, the assessee has also incurred expenditure of Rs.33.82 lakh as employee related expenses and Rs.334.73 lakhs as miscellaneous expenses aggregating to Rs.368.55 lakh in respect of the Chennai unit which had also been claimed as a deduction while computing the business income. According to Ld. AR on 04.09.2014, the assessee's return of income

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. for the current year was selected for scrutiny by issue of notice under section 143(2) of the Act. In the course of assessment proceedings, the AO sought details of the expenses at the Chennai unit as well as depreciation relating thereto and show-caused why the same should not be disallowed. Pursuant thereto, the assessee made detailed submissions with respect to depreciation claim of assets of the discontinued plant at Chennai, & deductibility of the revenue expenses of Rs.334.73 lakh incurred at the Chennai unit by its submissions dated dated 19.12.2016 (refer pages 189 and 192 of the PB). With respect to depreciation relatable to the assets of the Chennai unit, it was explained by submission dated 19.12.2016 that, the assets of the said unit formed part of the block of assets and hence has lost their individual identity. Further, Ld AR, pointed out that the pre-conditions specified in section 43(6)(c) of the Act necessary for reducing the written down value also has not been fulfilled. Therefore, he urged that when the factory building, plant & machinery and furniture and fixture relating to Chennai unit formed part of the assessee’s block of asset was rightly allowed after enquiry by the AO. Therefore, according to him, the AO has discharged his duty as an investigator (by making enquiry on the depreciation claim of Chennai unit) and had adjudicated the claim by taking a plausible view, which is supported by the ratio laid by the Hon’ble Bombay High Court in the case of CIT vs G R Shipping Ltd., wherein, the assessee's claim of depreciation on a barge which had sunk and retrieved but not used for the purposes of business for the whole of the year had been upheld. The Ld AR also cited the decision of several cases including that of Bombay High

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. Court in CIT vs Estate & Finance Ltd (111 ITR 119) to support the action of AO allowing depreciation. Thus, according to Ld. AR, the depreciation claim even for a unit not functioning was allowable after the concept of block of asset has been brought in statute. And convinced by the facts, and understanding the concept of block of assets, the AO allowed the claim for depreciation in respect of Chennai unit, and the AO on 27.12.2016 passed the draft assessment order u/s 143(3) read with section 144C(1) of the Act, and after Ld. DRP direction on 21.09.2017, the AO passed the final assessment order on 30.11.2017, which has been interfered by the Ld. PCIT invoking his revisional jurisdiction u/s 263 of the Act, which impugned action according to Ld. AR is wholly without jurisdiction because the AO’s action of allowing the depreciation claim of Chennai unit cannot be termed as “erroneous or prejudicial to the Revenue” without which, according to Ld. AR, the PCIT lacks jurisdiction to interfere with the action of AO u/s 263 of the Act. Thus, according to Ld. AR, the Ld PCIT without satisfying the essential condition precedent for invoking jurisdiction u/s 263 of the Act, could not have been racked up the issue of depreciation of Chennai unit, since this issue has already been investigated by AO and the allowed by him was a plausible view and therefore, Ld. PCIT could not have invoked his jurisdiction without recording a finding that the view of the AO on this issue was “unsustainable in law”. Further, it was pointed out by the Ld. AR that the Ld. PCIT got influenced by the decision of this Tribunal order dated 19.11.2018 for the assessment year 2012-13, denying the assessee's claim for depreciation on the assets relating to the Chennai

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. unit. According to him, a bare perusal of Tribunal order at paragraph 40 page 30 would show that in assessment year 2012-13, the Chennai unit had been leased out giving rise to “income” which was assessed as “income from house property”. According to him, as per section 24 of the Act, depreciation is not a permissible deduction when the income is assessed under the head “income from house property” and, therefore, the Tribunal may have been justified in upholding the action of AO denying the depreciation claim. However, during the year under consideration, the assessee has neither earned any lease rental as it is clear from its Profit and loss account including the relevant schedule relating to other income and drew our attention to pages 39 and 50 of the PB nor the assessee been assessed to any income under the head “income from house property” (and he drew our attention to the computation of income reflected at page 73 of the Paper book and the computation of income as per the assessment order at page 225 of the PB. Therefore, the crucial fact (Chennai unit given on lease & lease rental shown as House Property income) which led to the denial of the depreciation for earlier year AY. 2012-13, cannot be reason for holding that the view of AO allowing the claim of depreciation in AY. 2013-14 was erroneous, when there is change in facts and assessee has not leased out the Chennai Unit nor shown any rental income/income from house property. Therefore, according to Ld. AR, the Ld. PCIT erred in appreciating the distinguishing facts regarding the Chennai Unit and the AO has correctly appreciated the facts of AY. 2013-14 and therefore departed from the view of his predecessor for AY. 2012- 13 and allowed the depreciation which is a plausible view and at any

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. rate cannot be termed as “Unsustainable in law”. During the course of hearing, we had asked the Ld. AR, if an asset is removed from the block of asset in view of letting out of the factory building and assessment of such rental income as income from house property, how can depreciation be allowed thereon in a later year. The Ld. AR answered that in such an event the asset is not removed from the block of asset when income arising there from is assessed as “income from house property” as there is no dispensation to this effect in the Act. The depreciation on such asset is not allowable as deduction under the head “income from house property” are those provided in section 24 of the Act and depreciation is not one of them. Hence, denial of the claim of depreciation for the assessment year 2012-13 should not come in the way of grant of such claim for assessment year 2013-14, when the reason for such denial does not exist in the said year. It is hence submitted that, the Ld. PCIT erred in relying upon the Tribunal decision without appreciating the peculiar facts for the said year. Reliance was also placed on the order of the Hyderabad bench of the Tribunal in the case of Shrinivas Hatcheries (P.) Ltd vs CIT 81 ITD 36 (see pages 478 to 483 of the Legal PB). In that case revisionary jurisdiction had been assumed as the view taken by the AO was contrary to that taken by the Hon’ble Karnataka High Court. The AO in that case had allowed depreciation on bird-cages at the rate of 100% as the actual cost in respect of each cage was less than Rs.5000. The Hon’ble Karnataka High Court was of the view that the plant would be the entire items of cages and not each individual cage and therefore the actual cost was not less than Rs.5000. Though, the Tribunal in that

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. case was of the opinion that assessee's case squarely fell within the ratio of the Hon’ble Karnataka High Court and 100% depreciation on cages was not allowable, it accepted the contention of assessee that two views were possible in respect of this issue, and therefore, the Tribunal held that Ld. CIT was not justified in invoking such revisionary jurisdiction and drew our attention to paragraph 10 thereof at page 482 of the Legal Paper book. In the light of the foregoing according to Ld. AR that the view taken by the AO is a possible one and hence the action of AO taken regarding the claim of depreciation of Chennai Unit cannot be regarded as erroneous as well as prejudicial to the interests of the revenue.

i. By the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 01.04.1988, the concept of block of assets has been inserted in the Act (see section 2(11) of the Act). A bare perusal thereof, shows that it means a group of assets falling within a class of assets comprising of buildings, machinery, plant or furniture in respect of which the same percentage of depreciation is prescribed. It is submitted that, the block of assets exist for the assessee as a whole and there is no concept like block of assets for each unit. This is also clear from the relevant disclosure with respect to the depreciation claim in

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. the Form of return of income (see pages 98 and 99 of the Factual PB).

(ii) As per section 32 of the Act, depreciation is to be allowed on the written down value of the block of assets owned and used by the assessee for the purposes of its business. The condition relating to ownership of assets and use thereof for the purposes of the business has to be fulfilled with respect to the block of assets and not for each individual asset. In the present case, it is an admitted position that the block of assets of plant and machinery, building and furniture and fittings has been used for the purposes of business as the two manufacturing units at Ranjangaon near Pune are functional. It is submitted that, thereafter the assessee is not required to establish that each individual asset forming part of the block of assets are used for the purposes of business.

(iii) As per section 43(6)(c)(B) of the Act, the written down value of the block of assets can be reduced only by the reduction of the moneys payable in respect of any asset falling within that block which is sold or discarded or demolished or destroyed during that previous year. In the present case, neither has the assessee sold or discarded or demolished or destroyed all the assets relating to the Chennai unit nor has it received any consideration in respect of the same. The moneys received from sale of depreciable assets, notwithstanding whether it relates to the Chennai unit or the units at Ranjangaon, have been reduced from the written down value of the block of assets (see row 5 with the heading "Consideration or other realization during the previous year out of 3 or 4" at pages 98 and 99 of the Factual

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. PB). Hence, denial of depreciation on all the assets relating to the Chennai unit is not permissible.

(iv) In fact after the insertion of the block of assets concept, the individual identity of the asset is lost for which the following example was given: Supposing an individual assessee was owning two motor cars which formed a part of the block of motor cars. The opening written down value of the block was say Rs.5 lakh comprising of such WDV of motor car 1 of Rs.1 lakh and WDV of motor car 2 of Rs.4 lakh. If motor car 1 is sold during the year for Rs.40,000, as per section 43(6)(c)(B) of the Act, the amount of Rs.40,000 will be reduced from the written down value of the block of assets of motor car and depreciation will be allowed on Rs.4,60,000. This will be notwithstanding the fact that the assessee now owns only motor car 2 whose opening WDV was only Rs.4 lakh. Therefore, based on the concept of block of assets deprecation would continue to be allowed on the WDV of the asset (being motor car 1) which has been sold i.e., neither owned by the assessee nor used by him for the purposes of his business. Based thereon, it is submitted that the view taken by the AO in the assessment order is the correct view and, in the least, it is a possible view.

(v) With respect to the above, reliance is also placed on Tribunal order dated 17.07.2008 in the case of G R Shipping Ltd. (see pages 529 to 534 of the Legal PB) which stood approved by the High Court by its order dated 28.07.2009 (see page 528 of the PB). That was a case where the assessee’s claim for depreciation on a barge which had sunk and retrieved but not used for the business for whole of the year has been allowed. The Gujarat High Court in CIT vs Sonal Gum Industries 322 ITR 542 (see

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. pages 605 and 606 of the Legal Paper Book) was concerned with a case, where part of the factory was non-functional and assessee's claim for depreciation has been upheld, while the Delhi High Court in CIT vs Oswal Agro Mills Ltd. 341 ITR 467 was concerned with grant of deprecation on assets relating to closed unit (see pages 589 to 597 of the Legal PB). The Tribunal orders being Sr. Nos, 25 to 29 and 31 and the Delhi High Court at Sr. No. 33 of the Legal Paper Book also support this proposition.

It is hence submitted that grant of depreciation by the AO on the assets of the Chennai unit was the correct position in law. In any event, in the least, it shows that two views were permissible on this issue and the AO has taken a possible view.

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. Unit. Therefore, he doesn’t want us to interfere with the action of Ld. PCIT. 10. We have heard both the parties and perused the material placed before us. Since the assessee has challenged the jurisdiction of the Ld. PCIT to pass the impugned order, let us first examine the scope of revisional jurisdiction u/s. 263 of the Act. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the Ld. CIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above the order passed by the Assessing Officer can be termed as erroneous for the purpose of section 263 of the Act. It has to be borne in mind that even if the Ld. PCIT/CIT finds that the assessment order is erroneous, he cannot invoke the revisional

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. jurisdiction u/s 263 of the Act without satisfying the additional requirement of second limb [i.e. the Ld. PCIT/CIT has to show that due to the erroneous assessment order, prejudice has been caused to the interest of revenue]. This essential requirement of law also needs to be satisfied before the Ld PCIT/CIT invokes revisional jurisdiction. This proposition of law has been laid down by the Hon'ble Supreme Court in the case of Malabar Industries (supra) wherein their Lordship’s held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an "erroneous" order passed by the Assessing Officer. Further the Hon’ble Supreme Court held ‘that for invoking powers conferred by section 263 of the Act, the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue’. At this juncture, one has to understand what is prejudicial to the interest of revenue. Their Lordship explaining about this in the said judgment (Malabar supra) held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It was further held that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law.

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. issue is found placed at page 187 to 192 of PB (relevant portion) only is reproduced as under: -

“3 Eligibility to claim depreciation in respect of assets pertaining to discontinued plant

JCIPL submits that during FY 2012-13, certain assets which are a part of tax depreciation block have not been actually used by the Company since the Company’s plant at Chennai was not functional during this period.

JCIPL has considered assets of Chennai unit and Ranjangaon unit as part of the common block for tax purposes. Once such assets form part of a block of assets, they lose their individual identity. Further, the principle that once asset enters into a block, entire block is to be considered, has been upheld by many judicial precedents.

With respect to the above, JCIPL further submits that the said assets cannot be removed from the block of assets for the purpose of income-tax. As per the provisions of section 43(6)c) of the Act, the written down value of the block of assets can be reduced by money’s payable in respect of the asset which is sold/ discarded/demolished/ destroyed.

Since, the asset has not been actually sold /discarded /demolished ‘destroyed, JCIPL submits that the asset cannot be excluded for the purpose of depreciation and the said cannot be reduced from block of assets. JCIPL further submits that depreciation should be allowed with respect to the block of assets so long as block of assets does not get exhausted or the WDV of the asset does not become NIL. The usage of

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. individual asset during a particular year is not relevant for depreciation claim. After bringing the concept of block of asset under the statute, the identity of the individual asset is lost.

Extracts of several judicial precedents endorsing JCIPL’s position are as follows:

a) The Hon’ble Supreme Court in the case of CIT Vs Virmani Industries Pvt Ltd (SC) [ 216 ITR 607), held that:

“For availing the benefit of s. 32(2), it is not necessary that the same business Should be carried on in the following previous year, nor is it necessary that the asset which earned the depreciation in the preceding year should exist and continue to be used in business in the following year nor that the assessee should carry on any business or profession in the following year; therefore, the unabsorbed depreciation allowance relating to the asst. yr. 1956-57 ought to have been set off against the income for the following assessment years, and after such set off if any depreciation allowance still remained unabsorbed it could have been set off against the income for the accounting period relevant to the asst. yr. 1965- 66".

b. Following the above SC decision, the Hon’ble jurisdictional Bombay High Court in the case of CIT Vs Estate & Finance Ltd (Bombay HC) {111 YTR 119}, held that the depreciation (unabsorbed) in respect of a discontinued business can be carry forward and set off even if the source in respect of which the depreciation was computed had ceased to exist.

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. c. In the case of CIT v G R Shipping Limited (Bombay HC) (2009), the Hon’ble Jurisdictional Bombay HC held that individual assets lose their identity once they form part of block of asset and test of user has to be applied upon the block as a whole.

d. In the case of Swati Synthetics Ltd 38 SOT 208 (Mum ITAT), the Hon’ble Jurisdictional ITAT was held that:

“However, if we adopt a harmonious reading of the expressions ‘used for the purposes of the business’ and ‘discarded’ then it would show that ‘used for the purpose of business’ only means that the assessee has used the machinery for the purposes of the business in earlier years... ...the condition/requirement of section of word ‘used for the purpose of business’ as provided in section 32 of (L) of the Act for the concept of deprecation on block of assets can be summarized, that use of individual asset for the purpose of business can be examined only in the first year when the asset is purchased. In subsequent years use of block of assets is to be examined Existence of individual asset in block of asset itself amounts to use for the purpose of business.”

e. The Mumbai ITAT in the case of Unitex Products Ltd. Vs ITO (22 SOT 429), stated:

“Once asset was a part of block of asset and depreciation was granted on that block it cannot be denied in the subsequent year on the ground that one of the assets was not used by the assesse in some of the years.”

f. In case of E-City Entertainment India (P) Ltd. Vs. Addl. CIT 24 ITR (Trib) 73, the Hon’ble Jurisdictional ITAT was held that:

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. “Following the concept of block of assets, if an asset has entered into the block of assets and depreciation has been granted on it, the claim of depreciation cannot be denied in subsequent years,”

g. In the case of Netco Exports 86 ITD 445 (Hyd), it was held that:

“…..it is clear that as long as an asset forms part of the block of assets and the block continues to exist, provisions of section 50 do not come into play and depreciation has to be allowed on that portion of the W.D.V. of the assets which have been scrapped, after reducing the scrap value from the block of assets.”

h. The Hon’ble High Court of Andhra Pradesh in the case of Hyderabad Construction Co Ltd Vs CIT (HC AP) [129 ITR 81], held that:

“....for the purpose of setting off unabsorbed depreciation carried forward from the previous year, it is not necessary that the business in respect af which the depreciation allowance was originally worked out should remain in existence in such a succeeding year."

i. In support of the above, we also draw reference to the DCIT Vs. Finolex Cables Ltd. 114 TTI 785 (Pune), where it was held that:

“.. this was the second year of the claim of depreciation in respect of flats, the depreciation was allowed in respect of these flats in the earlier year, that depreciation was allowable on the entire block of assets.”

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. j. Gujarat HC in the case of CIT. Vs Sonal Gum Industries. (322 ITR 542)

“…in relation to the block of assets, it is not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. Once it is found that the assets are used for business, it is not necessary that all the items falling within plant and machinery have to be simultaneously used for being entitled to depreciation."

k) Gujarat high court in case of ACIT. Vs S_K. Patel Family Trust (25] CTR 427)

“For granting depreciation on a block of assets the items of the block are not be segregated. It is not necessary that all the items falling in the block have to be used simultaneously. ”

L Kolkata ITAT in case of Cellica Developers (P) Ltd. Vs DCIT 63 SOT 255

“Once a machinery is becomes the part of a block, it losses its separate identity. Depreciation is granted on block of assets as stipulated in section 36(1)(ii). Once the boiler was already used, cannot say that it was not ready for use. Passive use of the boiler, argument by the assessee has to be accepted. We, therefore, find that the disallowance was not in accordance with law. Such disallowance stands deleted.”

In view of aforementioned judicial precedents, JCIPL submits that the depreciation claimed in respect of assets of the non- functional plant is based on provisions of the Act and has also

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. been endorsed by various appellate forums and accordingly, should be eligible for deduction.

Additionally, while concluding the assessment proceedings for AY 2012-13, the predecessor tax officer disallowed an estimated amount of depreciation of Chennai unit, since the rental income was offered to tax under the head House Property and no deduction other than the standard deduction is allowed in such cases.

Your goodself would appreciate that there was no income under the head House Property during AY 2013-14 and therefore, no such standard deduction has been claimed during the year. Hence, no disallowance of depreciation pertaining to Chennai unit should be made for AY 2013-14.”[Emphasis given by us]

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. deduction is allowed, and that the AO for AY. 2012-13 declined to grant depreciation; and that in the year under consideration, AY. 2013- 14, the assessee has not given the Chennai plant for lease, and so it claimed the depreciation in question. The AO taking note of the change in facts of the preceding year, departed from the decision of his predecessor AO and allowed the claim of depreciation of assets of the Chennai Unit in view of the judicial precedent cited in submission (supra). Thus, we note that AO was aware that Chennai Unit was not functioning and the assessee had made claim of depreciation in respect of assets pertaining to discontinued plant at Chennai Unit; and realizing the fact that the assets of the Chennai Unit was part of the common block of assets of assessee’s other functioning plants at Ranjangaon units, the AO had allowed the claim. Thus AO had allowed the claim of depreciation after due application of mind and after enquiry. Thus AO has discharged the duty of an Investigator; and the AO has examined the issue and allowed the claim which are supported by the decision of the jurisdiction Hon’ble High Court and Tribunal (supra). Therefore, his adjudication of the issue cannot be faulted because it is a plausible view and at any rate cannot be termed as unsustainable in law. The Ld. PCIT in the impugned order has emphasized the fact of this Tribunal order in assessee’s own case for AY. 2012-13 wherein Tribunal upheld the action of AO denying the depreciation. We find that the AO for AY. 2012-13 had noticed that assessee had leased out its Chennai Unit & offered rental income under the head “income from house property” and therefore only standard- deduction would be allowable, so depreciation u/s 32 of the Act was

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. disallowed. However, in this year AY. 2013-14, the assessee has not leased the Chennai Unit and therefore there is change in facts and law, therefore, the assessee’s claim of depreciation u/s 32 of the Act allowed by the AO noticing this crucial fact and allowing it is a plausible view and therefore the action of AO cannot be said to be unsustainable in law.

Order pronounced in the open court on this 08/02/2024.

Sd/- Sd/- (S. RIFAUR RAHMAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 08/02/2024. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6.

ITA Ns. 349/Mum/2021 A.Ys. 2013-14 Jabil Circuit India Pvt. Ltd. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai