The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench consisting of Pramod Kumar, Vice President, and Siddhartha Nautiyal, Judicial Member held that where asset purchased by the assessee has been used in business and included in ‘block of asset’, depreciation to be allowed.
The assessee, Meghmani Energy Ltd. is engaged in the business of producing energy. During the course of the assessment proceedings, Assessing Officer (AO) observed that the assessee had not generated any revenue for the year from business operations. Further, the assessee had claimed to shift and dismantle expenditure for Rs. 14,97,804/- and the assessee had shifted its plants and machinery in the year under consideration. Therefore, Assessing Officer held that it is evident that during the year under consideration, there was no business activity and the assessee had not used its plants and machinery for business purposes. Hence, Ld. Assessing Officer disallowed certain expenditures and depreciation of Rs. 1,71,24,757/- on plant and machinery claimed by the assessee during the year under consideration. The Commissioner of Income Tax (CIT), dismissed the assessee’s appeal by holding that the assessee had no business activity during the year under consideration and had not used its Plant and Machinery during the entire year at all. In fact, as per the assessee’s own admission, the Plant and Machinery of the assessee were dismantled and shifted during the year under consideration and the assessee had claimed to shift and to dismantle expenditure in respect of the same. Accordingly, since no part of the entire block of Plant and Machinery was put to use in the entire year, the assessee’s claim for depreciation on Plant and Machinery of Rs. 1,71,24,757/- cannot be allowed.
The Tribunal observed, “merely because there was no manufacturing activity in the relevant previous year, that could not be reason enough to come to the conclusion that unabsorbed appreciation of assessee in earlier years was not entitled to be set off against its business income in the current year, we are of the considered view that assessee should be allowed set-off of unabsorbed brought forward depreciation and business loss during the year.”
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