“block of assets”
The decision most relied on for block of assets is CIT v. Meghalaya Steels Ltd. (383 ITR 217), cited in 203 judgments on BharatTax.
Leading authorities on block of assets
Subsidies and excise duty refunds that are accounted for in the Profit and Loss account are revenue in nature, form part of business income, and are eligible for deductions under Section 80IB/80IC. Such receipts cannot be reduced from the block of assets for depreciation calculation.
The Legislature abolished terminal depreciation under section 32(1)(iii) and the taxing of balancing charge under section 41(2), replacing these provisions with the requirement to reduce sale proceeds of depreciable assets from the block of assets.
The 20% tax rate under Section 112 applies to capital gains arising from the transfer of a depreciable asset, even if it is deemed a short-term capital gain under Section 50, provided the asset was held for more than 36 months. The fiction created by Section 50 for treating such gains as short-term does not alter the long-term nature of the asset for applying the tax rate under Section 112.
A statement recorded under Section 132(4) during a search operation is not considered "books of account," "documents," or "assets found or seized" for the purpose of initiating search assessments under Chapter XIVB (e.g., Section 158BD or 153C). Such a statement is created during the search and cannot solely form the basis for assessment without other incriminating material found.
Depreciation is allowable on a non-compete fee as it constitutes an intangible asset, even if the right acquired cannot be transferred, provided it is treated as part of a block of assets.
Depreciation on a building used for business purposes should be allowed following the rule of consistency if it was allowed in earlier assessment orders and the Assessing Officer raised no doubts about its use.
Depreciation must be allowed on the entire block of assets as defined in Section 2(11) of the Income-tax Act, and individual assets of each unit cannot be considered separately for this purpose.
Depreciation on an asset forming part of a block of assets must be allowed in subsequent years if it was allowed in an earlier year. The opening written down value in a year cannot be disputed if it was correctly carried forward.
