depreciation
This query is : Resolved
17 June 2010
Q.book value of block of machine as on 1.4.2006= 100000.
if the assesse has not carried on any business during the past 3years.
claim depriciation for the assement year 2010-2011.
if the assesse has not carried on any business during the past 3years.
claim depriciation for the assement year 2010-2011.
17 June 2010
Once the machinery is put to use and form parts of block of asset. Then it is eligible for claim depreciation.
There is no need to check whether it is used or not after forming block of asset.
you can take depreciation agaisnt it.
There is no need to check whether it is used or not after forming block of asset.
you can take depreciation agaisnt it.
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17 June 2010
pLEASE find the below case study regarding Once the assets is put to use first time and forms part of block of assets, then no need to check asset is used in curent year or not, you can claim dep on it.
CASE STUDY:
CIT vs. Bharat Aluminium (Delhi High Court)
Under “block of assets”, user of individual assets is not required
The assessee purchased machinery which was not put to use during the year though it formed a part of the “block of assets”. On the question whether depreciation on the said machinery was allowable, the Tribunal held that once a particular asset falls within the block, it is added to the WDV and depreciation is to be allowed on the block. The individual asset loses its identity and the question whether an individual asset is put to use in a particular year or not is irrelevant inasmuch as the requirement of law is to establish the use of the block of assets and not the use of particular equipment. On appeal by the Revenue, HELD affirming the Tribunal’s order:
(i) The rationale and purpose for which the concept of block asset was introduced, as reflected in the CBDT’s Circular dated 23.09.1988 is that once the various assets are clubbed together and become ‘block asset’ within the meaning of s. 2(11), it becomes one asset. Every time, a new asset is acquired, it is to be thrown into the common hotchpotch, i.e., block asset on meeting the requirement of depreciation being allowable at the same rate. Individual assets lose their identity and become an inseparable part of block asset insofar as calculation of depreciation is concerned;
(ii) The fusion of various assets into the block asset gets disturbed only when the eventuality contained in clause (iii) of s. 32 takes place, viz., when a particular asset is sold, discarded or destroyed in the previous year (other than the previous year in which first brought in use). Even in that event, the amount by which the moneys payable in respect of that particular building, machinery, etc. together with the amount of scrap value is to be deducted from total written down value of the ‘block asset’;
(iii) Though 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;
(iv) The fact that under the second proviso to s. 32 assets acquired after 30th Sept shall be entitled to 50% depreciation of amount admissible does not mean requirement of user of individual asset remains intact. In the first year when the particular asset is acquired, user of the asset is required. In subsequent years, the user of individual assets is not required.
CASE STUDY:
CIT vs. Bharat Aluminium (Delhi High Court)
Under “block of assets”, user of individual assets is not required
The assessee purchased machinery which was not put to use during the year though it formed a part of the “block of assets”. On the question whether depreciation on the said machinery was allowable, the Tribunal held that once a particular asset falls within the block, it is added to the WDV and depreciation is to be allowed on the block. The individual asset loses its identity and the question whether an individual asset is put to use in a particular year or not is irrelevant inasmuch as the requirement of law is to establish the use of the block of assets and not the use of particular equipment. On appeal by the Revenue, HELD affirming the Tribunal’s order:
(i) The rationale and purpose for which the concept of block asset was introduced, as reflected in the CBDT’s Circular dated 23.09.1988 is that once the various assets are clubbed together and become ‘block asset’ within the meaning of s. 2(11), it becomes one asset. Every time, a new asset is acquired, it is to be thrown into the common hotchpotch, i.e., block asset on meeting the requirement of depreciation being allowable at the same rate. Individual assets lose their identity and become an inseparable part of block asset insofar as calculation of depreciation is concerned;
(ii) The fusion of various assets into the block asset gets disturbed only when the eventuality contained in clause (iii) of s. 32 takes place, viz., when a particular asset is sold, discarded or destroyed in the previous year (other than the previous year in which first brought in use). Even in that event, the amount by which the moneys payable in respect of that particular building, machinery, etc. together with the amount of scrap value is to be deducted from total written down value of the ‘block asset’;
(iii) Though 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;
(iv) The fact that under the second proviso to s. 32 assets acquired after 30th Sept shall be entitled to 50% depreciation of amount admissible does not mean requirement of user of individual asset remains intact. In the first year when the particular asset is acquired, user of the asset is required. In subsequent years, the user of individual assets is not required.
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