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Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Shri A.T.Varkey, JM ]
ITA No.126/Kol/2016 M/s. Kesoram Textile Mills Ltd A.Y.2005-06 1
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH ‘D’ KOLKATA [Before Hon’ble Shri J.Sudhakar Reddy, AM & Shri A.T.Varkey, JM ] ITA No.126/Kol/2016 Assessment Year : 2005-06
I.T.O., Ward-11(3) -versus- M/s. Kesoram Textile Mills Ltd. Kolkata Kolkata (PAN: AABCK 2416 N) (Appellant) (Respondent)
For the Appellant: Shri Arindam Bhattacharjee, Addl. CIT For the Respondent: Shri Akkal Dudhwewala
Date of Hearing : 25.09.2017. Date of Pronouncement : 15.11.2017.
ORDER PER J.SUDHAKAR REDDY, AM:
This is an appeal by the Revenue directed against the order of the Commissioner of Income Tax-(A)-10, Kolkata relating to A.Y. 2005-06 on the following grounds :- “1. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the disallowance of depreciation of Rs.38,46,405/- on plant and machinery and on Factory Building.
The appellant craves leave to add/delete/modify the grounds of appeal.”
After hearing the rival contentions we find that the First Appellate Authority has recorded that the assets in question is part of the “block of assets”. He held that once the asset merges with the existing block of assets, which carry the same rate of depreciation and one asset of the block is put to use then the entire block would be eligible to depreciation.
The ‘B “ Bench of this tribunal in ITA No.2008/Kol/2014 for A.Y.2005-06 held as follows :-
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“4.1.1. Even otherwise, under the block of assets concept, the requirement of. using of the plant and machinery, by the assessee, during the Financial Year, does not arise. For this proposition we rely on the decision of the Hyderabad Bench of the ITAT in the case of Natco Exports vs Dy. Commissioner of Income Tax, order dt. 11th June 2002,200386 ITD 445 Hyd, wherein it was held as follows:- "[b] The CIT(A) ought to have seen that when once the value of asset forms part of block of assets, depredation is to be allowed . 'on the entire block irrespective of user of any item falling within the block during the assessment year and hence depreciation cannot be disallowed on ponds stating that they were not used by the appellant during the assessment years 1997-98 & 1998- 99 ... From the above, 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. This view 'is fortified by the judgments of Jabalpur Bench of the ITAT in the case of Packwell Printers, the judgment of the Ahmedabad Bench of the ITAT in the case of Inductotherm (India) Ltd. (supra) and the judgment of the Patna Bench of the ITAT in the case of Parikh Engg. & Body Bldg. Co. Ltd. (supra). Therefore; in view of the decisions and interpretation of the concept of "block of assets" depreciation on ponds which is forming part of the block of assets has to. be allowed as deduction even though these ponds were discarded and not used. and not owned by it during ·the assessment years in question, as the assessee was not entitled to any scrap value . whatsoever; consequent to discarding. Coming to the case law relied upon by the Id. Departmental Representative and by the Id. CIT(A), all of them are distinguishable as all these cases dealt with grant of depreciation for -assessment years before the in troduction of the concept of depreciation on "block assets." . Thus, we uphold the claim of the assessee for depreciation for both the assessment years and $et aside the order of the Id. CIT(A).
Respectfully following the propositions of law laid down in the above judicial precedent, we allow this claim of the assessee.”
In our view the proposition of law laid down in this order apply to the facts of this case. The judgment of the Hon’ble Supreme Court in the case of Liquidators of Pursa Ltd vs CIT (1954) 25 ITR 265 and the decision of the Hon’ble Bombay High Court in the case of Machinery Manufacturers Corporation Ltd vs CIT 31 ITR 203(Bom) are not applicable to the facts of the case for the reason these judgments were delivered prior to the block asset brought under the income tax.
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Even otherwise, the mill in question remained closed from 05.01.1999. The yarn production was 8087 kgs. Hence it is not a case where the factory has been totally closed down. Only one unit has been shut down. The jurisdictional High Court in the case of M/s. Budge Budge Company Ltd. Vs CIT has held as follows :- “The learned Tribunal found the decision of this court in the case of CIT Vs. Oriental Coal Co. Ltd. reported in (1994) 206 ITR 682 was squarely applicable to this case in rejecting the contention of the appellant that there was passive use of the plant and machinery of the mills for depreciation to be allowed in the lock- out period. In our view the decisions relied upon by Mr .Sen support his contention. In Hindusthan Gas & Industries Ltd. this court in allowing the claim of depreciation of diesel generating sets leased out for the period when the lessee's factory premises was under lock-out had taken the following view:-
"The business of the assessee-company was to lease out generating sets. The lease in the instant case expired on 30-11-1974 but the assessee-company did not get back the diesel generating set because of the lock-out declared in the lessee's factory. Lock outs and strikes are the usual business hazards that a company has to face in course of running of the business. The fact that the lock- out was not in theassessee's own business does not make any difference to the position. The assessee had leased out a generating set in course of its business. It could not get back the set even after the lease period because of the lockout in the lessee's factory. This is a happening which was incidental to the assessee's business of leasing out generating sets. The assessee itself was not actually running the generating sets. The assessee's business was leasing out the generators. The generating set was being used by the assessee and is still being used by the assessee in its business of leasing out generating sets. Therefore, the claim of the assessee has to be allowed. Accordingly, question no.4 is to be answered in the negative and in favour of the assessee."
In M/s. Norplex Oak India the claim .for depreciation of plant and machinery arose because work was suspended due to serious deterioration of the law and order situation in the Kashmir Valley, this court had said:-
"In the case before us, the assessee was ready for doing his business. But for the adverse law and order situation, he could not actually run the factory although all the machineries were ready for use and the valuation of such machinery also depreciated notwithstanding its non-user. Notwithstanding such . adverse law and order situation, the assessee did not abandon its business but suffered loss for such a state of affairs prevailing in that State over which he had no control with an expectation of resuming the business. This is not a case where the assessee himself is embroiled in a dispute with his labourers and in the process, has decided to declare a lockout expressing its intention not to run the business. Thus, taking into consideration the circumstances of the present case, we are of
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the view that the Tribunal below rightly granted depreciation in favour of the assessee. " Our attention was not drawn to any finding to indicate that the suspension of work was actuated by any malice. The plant was lying ready for use.
Applying the aforesaid decisions to the facts in this case the first question has to be and is answered in the affirmative and against the revenue.”
Respectfully following the propositions of law laid down in the above judicial precedent to the facts of this case, we uphold the order of the ld. CIT(A) and dismiss the appeal of the revenue.
In the result the appeal by the revenue is dismissed.
Order pronounced in the Court on 15.11.2017.
Sd/- Sd/- [A.T.Varkey] [ J.Sudhakar Reddy ] Judicial Member Accountant Member Dated : 15.11.2017. [RG Sr.PS] Copy of the order forwarded to: 1.M/s. Kesoram Textile Mills Ltd., 42, garden Reach Road, Kolkata-700024. 2. I.T.O., Ward-11(3), Kolkata. 3. C.I.T.(A)- 10, Kolkata 4. C.I.T-4, Kolkata 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches
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