Depreciation
This query is : Resolved
16 October 2014
sir kindly solve my problem
there is a pvt. ltd. co.
having two units .
one unit is running properly but the second units operation is closed due to repair & maintainance.
so in 2013-14 fully operation is closed.
so kindly sir tell me that
DEPRECIATION to be charged or not.
17 October 2014
we can substantiate the vaibhav's answer with the below justification :
As per s. 32(1) the asset is to be owned and “used” for the purpose of business or profession, the expression “used for the purpose of business” when applied to block asset would mean use of block asset and not any specific items in the said block as individual assets have lost their identity after becoming inseparable part of the block asset.In the case of G R Shipping case, it was decided that the assessee, engaged in shipping business, owned a barge which was included in the block of assets. The barge met with an accident and sank on 6.3.2000 (AY 2000-01). As efforts to retrieve the barge were uneconomical, the barge was sold on as-is-where-is in May 2001 (AY 2002-03). As the barge was non-operational and not used for business at all in AY 2001-02, the AO denied depreciation. On appeal by the assessee, the Tribunal took the view that after the insertion of the concept of “block of assets” by the T.L. (A) Act, 1988 w.e.f. 1.4.1988 individual assets had lost their identity and only the “block of assets” had to be considered. It was held that the test of “user” had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the High Court dismissed the appeal holding that the issue was squarely covered in favour of the assessee by its earlier judgments in Whittle Anderson 79 ITR 613 and G. N. Agrawal 217 ITR 250.
As per s. 32(1) the asset is to be owned and “used” for the purpose of business or profession, the expression “used for the purpose of business” when applied to block asset would mean use of block asset and not any specific items in the said block as individual assets have lost their identity after becoming inseparable part of the block asset.In the case of G R Shipping case, it was decided that the assessee, engaged in shipping business, owned a barge which was included in the block of assets. The barge met with an accident and sank on 6.3.2000 (AY 2000-01). As efforts to retrieve the barge were uneconomical, the barge was sold on as-is-where-is in May 2001 (AY 2002-03). As the barge was non-operational and not used for business at all in AY 2001-02, the AO denied depreciation. On appeal by the assessee, the Tribunal took the view that after the insertion of the concept of “block of assets” by the T.L. (A) Act, 1988 w.e.f. 1.4.1988 individual assets had lost their identity and only the “block of assets” had to be considered. It was held that the test of “user” had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the High Court dismissed the appeal holding that the issue was squarely covered in favour of the assessee by its earlier judgments in Whittle Anderson 79 ITR 613 and G. N. Agrawal 217 ITR 250.
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