By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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Part A — Reported Decisions
50 (2008) 22 SOT 249 (Mum.)
Unitex Products Ltd. v. ITO
ITA Nos. 153 and 154 (Mum.) of 2003
A.Ys. 1996-97 & 1997-98. Dated : 25-1-2008
S. 32 r.w. S. 147 and S. 133A of the Income-tax Act, 1961 —
Once an asset was part of block of assets and depreciation was granted on that
block, it cannot be denied in subsequent year on the ground that one of the
assets was not used by the assessee in that year.
The Assessing Officer completed the assessments of the
assessee for the relevant years u/s.143(3). Subsequently, a survey u/s.133A was
carried out at the business premises of the assessee. On the basis of the
statement recorded of the estate manager (R), the Assessing Officer reopened the
assessment for A.Ys. 1996-97 and 1997-98 and disallowed the assessee’s claim for
depreciation and maintenance expenses of one building as R had stated that the
building was under structural renovation during the period and was vacated by
the assessee. The CIT(A) confirmed the Assessing Officer’s action.
The Tribunal reversed the orders of the lower authorities.
The Tribunal noted as under :
(a) Apart from R’s Statement, the Department had not
brought anything on record for negating the claim of the assessee with regard
to depreciation.
(b) Contrary to the facts possessed by the Assessing
Officer, the assessee had demonstrated that the building, though was under
renovation, yet was not totally abandoned; it had been using this building for
business purposes and it had incurred electricity expenses, telephone expenses
and made sales and purchases from this building. The assessee had also pointed
out that all correspondence was being made in that building only. The demand
notice was also served on these premises. It was also pointed out that
registered office address was also of this building.
(c) If one weighed the material produced by the assessee
vis-à-vis the solitary statement of R elicited by the authority during the
course of survey, then scale would tilt in favour of the assessee, because the
statement was recorded U/ss.(3)(iii) of S. 133A without administering the oath
to R. This was information which required corroboration for deciding an issue
against the assessee. The Assessing Officer had not brought any corroborative
piece of evidence in support of this information.
(d) It was also submitted by the assessee that the building
was part of its block of assets. The Tribunal in Packwell Printers v. ACIT,
(1996) 58 ITD 340 (Jab.) has considered a similar issue. This order of the
Tribunal was subsequently followed in Natco Exports v. Dy. CIT, (2003)
86 ITD 445 (Hyd.), etc. According to these decisions, once the asset is part
of block of assets and depreciation is 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 assessee in some of the years. The user of the assets has to apply
upon the block as a whole instead of an individual asset. The Revenue could
not cite any other decision contrary to the said decisions of the Tribunal.
Therefore, the assessee was entitled to depreciation and other expenses in
respect of the building.
