JITENDRA NATH PATNAIK,KEONJHAR vs. JCIT, RANGE-1, CUTTACK

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.136/CTK/2016 Assessment Year : 2012-2013

Sri Jitendra Nath Patnaik, Vs. JCIT, Range-1, Cuttack At/PO: Boniekala, Joda, Keonjhar. PAN/GIR No.ABFPP 3817 J (Appellant) .. ( Respondent)

Assessee by : Shri S.C.Bhadra, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 23/08/ 2017 Date of Pronouncement : 31/08/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the

CIT(A)-Cuttack, dated 29.1.2016 for the assessment year 2012-2013.

confirming the action of the Assessing Officer disallowing depreciation on

plant and machinery amounting to Rs.27,21,595/-, when the business is

not discontinued and the equipment are depreciated due to passive use.

that the assessee has suspended its mining activity w.e.f 5.8.2010.

During the financial year 2011-12, pertaining to assessment year 2012-

13, there was no business or manufacturing activity taken by the

assessee. The assessee has effected only one sale on 31.3.2012 of the

2 ITA No .136/ CTK/ 2016 Asse ssment Year : 20 12- 201 3 opening stock available in the beginning of the financial year i.e. on

1.4.2011. The Assessing Officer observed that since there has been no

ore raising activity, the claim of depreciation on heavy vehicle amounting

to Rs.1,09,504/- and on plant and machinery of Rs.27,21,595/- is not

allowable and, therefore, added the same to the income of the assessee.

argued that it has not closed down the business unit nor ceased to do

business of mining activities. The mining activities were temporarily

suspended due to Government of Odisha’s order and other activities were

being carried out. As such, there was loss on account of wear and tear of

machineries though not operated due to efflux of time. The mining

activities are likely to resume any time once the Government lifts the

closure order. There was a sale during the year and the assessee was

carrying stock in trading which could not be disposed off without permit

for transfer from the Department of Mines. The assessee was continuing

to be the owner of mines, plant and machinery, etc, and, therefore,

depreciation was allowable to the assessee for which it placed reliance on

some judicial pronouncements.

depreciation cannot be allowed to the assessee only on the ground of

possessing the asset and that the assets should be used for the business

of the assessee. This test is to be applied for the claim of depreciation by

the assessee every year. He observed that the assessee has relied on the

3 ITA No .136/ CTK/ 2016 Asse ssment Year : 20 12- 201 3 decision of Hon’ble Delhi High Court in the case of Capital Bus Service (P)

Ltd vs CIT (1980 123 ITR 404 (Del), wherein, it was held that the word

“used” in this section may be given a wider meaning and embraces

passive as well as active user. Machinery which is kept idle may well

depreciate, particularly during the monsoon season. It seems that the

ultimate test is, whether, without the particular user of the machinery

relied upon the profits sought to be taxed could have been made and in

the case , the profits of the assessee during the year could not have been

earned except by his maintaining his factory in good, working order, and

that involves the user of the factory and the machinery”. The CIT(A)

observed that the major test for allowing depreciation is an actual

expenditure incurred by the assessee, is whether the profits sought to

have been made without the particular use of the said plant and

machinery for which depreciation is claimed by the assessee. The

assessee during the impugned year has effected only one sale on

31.3.2012 of the opening stock available as on 1.4.2011. To effect this

sale and to earn profits on such sale, the assessee has not used plant and

machinery during the year as there was no manufacturing activity. Thus,

he was unable to agree with the contention of the assessee that

depreciation should be allowed on plant and machinery as they were kept

ready for use. The CIT(A) further observed that on perusal of judicial

decisions relied on by the assessee, in each such decisions, the facts were

discussed by the higher legal authorities and the decision was taken

regarding the allowability of depreciation. The case of the assessee falls

4 ITA No .136/ CTK/ 2016 Asse ssment Year : 20 12- 201 3 squarely on the decision of Hon’ble Delhi High Court in the case of Capital

Bus Services (P) Ltd (supra), where a test for allowing depreciation has

been defined. The action of the Assessing Officer in disallowing

depreciation on plant and machinery is, therefore, sustained.

before the CIT(A). He relied on the decision of Hon’ble M.P. High Court in

the case of CIT vs. Premier Industries (India) Ltd., 323 ITR 672 (MP),

wherein, it was held that depreciation should be allowed if machine was

kept ready for use. Ld A.R. also relied on the decision of Hon’ble Delhi

High Court in the case of CIT vs. Mr Kamal Sawhney in ITA No.530/2011

order dated 16.11.2011.

authorities and materials available on record. In the instant case, the

Assessing Officer disallowed the claim of depreciation of Rs.27,21,595/-

on plant and machinery on the ground that they were not actually used

for the business of the assessee, which was confirmed by the CIT(A) in

appeal relying on the decision of Hon’ble Delhi High Court in the case of

Capital Bus Services (P) Ltd (supra). The contention of the assessee is

that since machineries were kept ready for use for the business of the

assessee and the business was temporarily suspended by the order of

Government of Odisha due to ban on mines, therefore, the claim of

depreciation should be allowed to the assessee. He has relied on the

5 ITA No .136/ CTK/ 2016 Asse ssment Year : 20 12- 201 3 decision of Hon’ble M.P. High Court in the case of Premier Industries

(India) Ltd(supra) and also the decision of Hon’ble Delhi High Court in the

case of Mr Kamal Sawhney (supra). When questioned by the Bench that

from the year ending 31.3.2012, the assessee did not use plant and

machinery for its business of mining and it has claimed that they were

kept ready for use, then let the Bench know when the machineries were

actually put to use as we are now in the year 2017. Ld A.R. stated that

due to ban on mining by Government of Odisha, they could not be used

by the assessee. In our considered view, the machineries were not used

for almost six years approximately and there is uncertainty of their use

for the business of mining of the assessee due to ban by the State

Government. In these circumstances, it cannot be said that the

machineries were kept ready for the business o

f the assessee and it was temporarily suspended. Therefore, we find no

good reason to interfere with the order of the CIT(A), which is hereby

confirmed and ground of appeal of the assessee is dismissed.

Order pronounced in the open court on 31 /08/2017.

Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 31 /08/2017 B.K.Parida, SPS

6 ITA No .136/ CTK/ 2016 Asse ssment Year : 20 12- 201 3

Copy of the Order forwarded to : 1. The Appellant : Sri Jitendra Nath Patnaik, At/PO: Boniekala, Joda, Keonjhar. 2. The Respondent. JCIT, Range-1, Cuttack 3. The CIT(A)- Cuttack 4. Pr.CIT- Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack