M S Business India Television International Ltd Mumbai v. Ito New Delhi

In The Income Tax Appellate Tribunal Delhi Bench A New Delhi Before Shri Amit Shukla Judicial Member Shri O P Kant Accountant Member I T A No 4371 Del 2010 Assessment Year 2002 03 Dcit Circle 3 1 New Delhi Vs Business India Television International Ltd 14 Th Floor Nirmal Building Nariman Point Mumbai Tan Pan Aaacb 4781 G Appellant Respondent I T A No 4415 Del 2010 Assessment Year 2002 03 Business India Television International Ltd 14 Th Floor Nirmal Building Nariman Point Mumbai V Acit Circle 3 1 New Delhi Tan Pan Aaacb 4781 G Appellant Respondent I T A No 1358 Del 2013 Assessment Year 2009 10 Business India Television International Ltd 14 Th Floor Nirmal Building Nariman Point Mumbai V Ito Ward 3 1 New Delhi Tan Pan Aaacb 4781 G Appellant Respondent Appellant By Shri Subhakant Sahu Sr Dr Respondent By Shri S R Wadhwa Adv Date Of Hearing 11 12 2017 Date Of Pronouncement 18 12 2017 O R D E R I T A No 4371 4419 Del 2010 1358 Del 2013 2 Per Amit Shukla J M The Cross Appeals For The Assessment Year 2002 03 H As Been Filed By The Assessee As Well As By The Revenue Against Impugned Order Dated 20 Th July 2010 Passed By Ld Cit Appeals Vi New Delhi For The Quantum Of Assessment Passed U S 143 3 R W S 254 For The Assessment Year 2003 04 And The A Ppeal For The Assessment Year 2009 10 Has Been Filed By The Ass Essee Against Order Dated 19 12 2012 Passed By The Ld Cit A Vi New Delhi For The Quantum Of Assessment Passed U S 144 2 We Will First Take Up The Assessees Appeal For As Sessment Year 2002 03 Wherein The Following Grounds Have Bee N Raised 1 The Order Of The Ld Cit A Dated 20 07 2010 Is Bad In Law And On Facts 2 On The Facts And In The Circumstances Of The Cas E The Ld Cit A Has Erred In Confirming The Unsecured Loans Amo Unting To Rs 2 40 11 399 U S 68 Of The Income Tax Act 1961 De Spite The Fact That No Fresh Loans Were Taken During The Year And Increase In Loans Shown As Unsecured Loans In The Balance Sheet As On 31 03 2002 Was Due To Misclassification Of Them As Secured Loans In The Preceding Year 3 Without Prejudice To The Above The Ld Cit A O Ught To Have Given Adequate Opportunity To The Assessee To Adduc E Necessary Evidence To Substantiate Its Claim And Should Have Called For A Remand Report From The Assessing Officer Before Con Firming The Addition U S 68 Of The Act 4 On The Facts And In The Circumstances Of The Cas E The Ld Cit A Has Erred In Confirming The Addition Of Rs 4 8 41 204 Being Increase In The Current Liabilities I E Fro M Rs 36 96 80 588 As On 31 03 2001 To Rs 37 45 21 752 As On 31 03 2002 On The Ground That Details And Supportin G Evidences Were Not Filed 5 On The Facts And In The Circumstances Of The Cas E The Ld Cit A Erred In Confirming The Disallowance Of Prop Ortionate Interest Of Rs 1 06 022 Out Of Total Claim Of Rs 81 95 186 Without Giving Any Valid Reason I T A No 4371 4419 Del 2010 1358 Del 2013 3 3 The Facts In Brief Qua The Addition Made U S 68 As Culled Out From The Impugned Order Are That The Assessing Offi Cer Had Noted That There Was An Increase In Unsecured Loans In The Balance Sheet For Sum Of Rs 2 40 11 399 And Was As Ked To Provide The Confirmation From The Parties From Whom Th E Unsecured Loan Was Taken Along With Their Pan And Cop Y Of Their Latest Income Tax Return However No Such Details Or Co Mpliance Was Made By The Assessee And In Absence Of The Requis Ite Details The Entire Amount Was Added U S 68 By The Ao This Matt Er Had Travelled Upto The Stage Of The Itat Wherein The Tribun Al Has Set Aside This Issue Back To The File Of The Assessing Offi Cer To Redo The Assessment Again In The Set Aside Assessment Proceed Ings No Such Details Have Been Provided By The Assessee And As A Consequence Additions Have Been Reiterated By Him B Efore The Ld Cit A The Assessee Had Submitted That It Had Taken Loan S Icds In The Earlier Year From Some Lenders Which Was Wron Gly Classified Under The Head Unsecured Loans But At The Time Of Fi Nalization Of Account And After Verifying The Account It Was Found That These Loans Were Unsecured Loans Taken From Various Parties And The Majority Of Which Had Come From 5 Public Limited Com Panies However Before The Ld Cit A Also The Primary Onu S For Proving The Genuineness Of The Loan Could Not Be Established An D Accordingly Ld Cit A Too Has Confirmed The Said Addition 4 Before Us The Ld Counsel For The Assessee Mr S R Wadhwa Submitted That Almost The Entire Unsecured Loans O F Rs 2 40 Crore Had Been Received Through Well Reputed Pub Lic Limited Companies And Assessee Itself Being A Public Limited Company Had I T A No 4371 4419 Del 2010 1358 Del 2013 4 Duly Disclosed Such Unsecured Loan In The Audited Fin Ancial Accounts After The Matter Was Set Aside By The Tribunal Since Huge Time Had Lapsed Therefore Confirmation From All The Parties Could Not Be Obtained Barring The Confirmation Obtained From One Company M S Ganesh Banzoplast Ltd And Copies Of L Edger Account Of Other Five Parties Has Also Been Filed Jus T To Show That The Loans Were Received Through Account Payee Cheques From The Public Limited Companies And Therefore The Genuinenes S Cannot Be Doubted Since The Business Of The Assessee Had Alr Eady Been Stopped Long Ago Therefore It Was Difficult To Get Thes E Letters From These Parties In Any Case These Being Limited Companie S Their Accounts Are In Public Domain And Hence The Loans Obt Ained From These Parties Must Have Been Duly Reflected In Their Re Spective Balance Sheets And Not Only That The Loans From These Parties In The Earlier Years Have Duly Been Accepted Without Dou Bting The Genuineness Thus He Submitted That Income Tax Authoriti Es May Be Directed To Call For The Information Directly From These Parties To Examine The Genuineness Of The Loan And Accordingly Addition Made Also Directed To Be Deleted After Receiving Suc H Information 5 On The Other Hand Ld Senior D R Strongly Relied Upon The Orders Of The Authorities Below And Submitted That The Onus Which Lied Upon The Assessee Under The Law To Prove The Genuineness Of The Loan Has Not Been Proved Despite Ample Opportunities Given To The Assessee At Various Stages R Ight From The Original Assessment Proceedings To Set Aside Proceedin Gs Thus The Contention Of The Learned Counsel That Income Tax Au Thorities Should Be Directed To Obtain The Information From The Sa Id Concerned Parties Cannot Be Accepted Especially After The Expiry Of I T A No 4371 4419 Del 2010 1358 Del 2013 5 Fifteen Years Since The Transaction Thus The Order Of The Ld Cit A Should Be Confirmed 6 After Hearing Both The Parties And On Perusal Of Th E Material Referred To Before Us We Find That Assessee Had Taken Loan For A Sum Aggregating To Rs 2 40 11 399 From The Following Parties Sr No Name Of The Party Amount In Rs 1 Siel Financial Services Ltd 50 00 000 2 Wizeman Limited 63 50 000 3 Ganesh Benzoplast 50 00 000 4 Garden Finance Limited 6500000 5 Muthoot Leasing Finance Ltd 10 29 468 6 Other Miscellaneous Parties 1 31 931 At No Stage Either During The Course Of The Original Ass Essment Proceedings Or In The Set Aside Proceedings The Ass Essee Could File Any Confirmation Or Any Other Document To Prove The Genu Ineness Of The Credits As Appearing In Its Books Of Account 7 The Primary Requirement As Envisaged In Sectio N 68 Is That Assessee Has To Explain The Nature And Source Of Th E Sum Found Credited In The Books And If Such An Explanation Is No T Offered Or Is Not Found To Be Satisfactory Then Such An Amount Is Dee Med To Be Income Of The Assessee Chargeable To Income Tax Thoug H The Nature Of Transaction Appearing In The Books Have B Een Stated To Be Unsecured Loan However The Source From Where Such Loan Have Been Received Could Not Be Proved Satisfactorily For Proving I T A No 4371 4419 Del 2010 1358 Del 2013 6 The Source Of Credit The Assessee Is Required To Satis Fy Prima Facie The Identity Creditworthiness Of The Creditors Lenders And The Genuineness Of The Transaction From The Facts As Can B E Culled Out Are That The Assessee Is Public Limited Company Wh Ich Seems To Have Received Unsecured Loans Mostly From The Pu Blic Limited Companies Not Only In The Earlier Years But Also I N This Year As There Was An Increase In Such Loan When The Assessin G Officer Required The Assessee To Explain The Source Of The Loan Received During The Year The Assessee Miserably Failed To Disc Harge Its Onus Though These Amounts May Have Come Through Account Pa Yee Cheques From Public Limited Companies But At Least Som E Kind Of Confirmation Of Account Or Confirmation Letter From The Se Creditor Companies Should Have Been Obtained And Given To The A Ssessing Officer That These Loans Have Been Given From The Sourc Es Disclosed In Their Respective Books Of Account And Or Duly Refl Ected In Their Balance Sheets It Is Only When Assessee Discharges Its Primary Onus That The Burden Shifts On The Assessing Officer That Such An Evidence Or Explanation Is Rebuttable Or Not Tenable On The Basis Of Material And Information Gathered By Him Here In This Case The First Step Itself Has Not Been Followed By The Assessee And Therefore We Are Of The Opinion That Addition Has Right Ly Been Made By The Ao And Confirmed By The Ld Cit A So F Ar As In The Case Of One Party The Confirmation Of Loan Which Ha S Been Filed For The First Time Before Us And Copy Of Ledger Account Of Other Five Parties In The Books Of The Assessee Have Been Given Only Goes To Show That The Amounts Have Been Received Through Accou Nt Payee Cheques Though This Only Goes To Show One Sided Entry In Assessees Books Of Account And Even Though Amounts May Have Come Through Account Payee Cheques But Something More Is Required U S 68 Like Creditworthiness And Identity O F The Creditor I T A No 4371 4419 Del 2010 1358 Del 2013 7 As Per The Principles Laid Down In Catena Of Judgmen Ts Though Preponderance Of Probability May Be Slightly In Favo Ur Of The Assessee That The Assessee Is A Public Limited Company And Loans Have Been Received From Public Limited Companies No T Only In The Earlier Years Where It Is Not In Dispute But Also In This Year Therefore The Genuineness Of The Loan Is Most Likely To Be Acceptable But In The Quantum Proceedings The Assessee Has To Substantiate Or Explain The Source Of Such Loan Which Can Only Be Proved By The Confirmation Of The Parties Or From Their Audited Accounts Or Income Tax Returns That Money Has Come From Their Own Sources And They Have The Creditworthiness For Gr Anting Such Loan The Copy Of Confirmation From One Party At This Stage Cannot Be The Sole Basis For Accepting The Genuineness Of The Loan Taken From The Said Party Because It Has Not Been Verified Or Subject To Scrutiny By The Assessing Officer As Assessee Shoul D Have Filed These Documents Before The Lower Authorities When Severa L Opportunities Were Given To It The Assessee If May S O Desire Can File All These Documents And Plead Its Case In The Cou Rse Of Penalty Proceedings If At All Is Initiated Where The Consider Ations Are Separate And Distinct From The Quantum Proceedings But In The Present Proceedings Such An Explanation Lacks Credibl E Evidence And Is Not Sufficient To Discharge The Onus Burden Whic H Lied Upon The Assessee Accordingly Ground No 1 2 And 3 Are Dismissed 8 So Far As The Issue Raised Vide Ground No 4 With Regard To Increase On Account Of Current Liabilities Of Rs 48 4 1 204 And Interest Paid Of Unsecured Loans The Brief Facts Are That The Assessing Officer Had Noted That There Has Been Increas E In The Current Liabilities By Sum Of Rs 48 41 204 And Des Pite Assessing I T A No 4371 4419 Del 2010 1358 Del 2013 8 Officers Request To Provide The List Of Sundry Creditor S Along With Pan And Income Tax Return No Such Detail Could Be Fur Nished By The Assessee Either In The Course Of Original Assessm Ent Proceedings Or In The Course Of Set Aside Proceeding S In Pursuance Of The Itat Order The Current Liabilities Have Increa Sed From Rs 36 96 80 548 To Rs 37 45 21 752 As On 31 03 2 002 The Contention Of The Assessee Before The Assessing Officer And Ld Cit A Has Been That These Current Liabilities Were Incurre D In The Course Of Business Which Cannot Be Doubted And They Re Present Expenses And Not Any Kind Of Cash Credit However Both Assessing Officer And Ld Cit A Did Not Agree With Such An E Xplanation And Confirmed The Said Addition On The Ground That The Ass Essee Could Not Furnish The Requisite Information And Details As As Ked So Far As The Interest Addition Of Rs 1 06 022 Is Concerned The Same Has Been Confirmed On The Ground That Assessee Could Not Explain The Credit Entries Of The Loan And Therefore Interest C Annot Be Allowed 9 Before Us The Learned Counsel Mr Wadhwa Su Bmitted That The Addition Has Been Made On Presumption And Guess Wo Rk Without Looking Into The Past Record And That The Cur Rent Liabilities Were Incurred In The Course Of Business Which Cannot Be Doubted However Due To Lapse Of Time And Assessees Business Being Closed It Was Difficult To Obtain Confirmation Or Detai Ls As Required By The Assessing Officer From The Respective Parties B Ut The Liabilities Incurred In The Course Of The Business Ca Nnot Be Disallowed Similarly With Regard To The Interest He Po Inted Out That No Basis Has Been Given In The Assessment Order An D As Per Schedule 3 Of The Balance Sheet It Can Be Seen That Asse Ssee Has Taken Huge Loan From The Bank And Overdraft Facility By Pledging I T A No 4371 4419 Del 2010 1358 Del 2013 9 The Movable Asset By The Company And Personal Guarantee Of Two Of Its Directors The Interest Accrued On Such Loans C Annot Be Disallowed Because Of These Amount Has Been Used For The Purpose Of Business 10 On The Other Hand Learned Sr Dr Strongly Relied Upon The Order Of The Ld Cit A 11 After Considering Rival Submissions And On Perus Al Of The Impugned Order We Find That The Assessing Officer And Ld Cit A Had Made The Addition On The Ground That Assessee Could Not File Any Requisite Information Or Details As Required Beca Use There Was Increase In The Liability In This Year For Which The Onus Was Upon The Assessee To Show That Such A Liability Had Arisen In The Course Of Business And It Is A Genuine Liability Simply Be Cause The Accounts Are Audited And Liability Is Appearing In T He Books Of Account It Cannot Be Held Or Presumed That These Liabilit Ies Have Been Incurred Purely During The Course Of The Busine Ss The Onus Is Upon The Assessee To Prove That Such A Liability Di D Exist And Has Been Duly Recognized By The Other Party And If R Equired From The Revenue Officials Assessee Has To Substantiate The S Ame Thus On This Score Also We Do Not Find Any Reason To Deviate From The Findings Recorded By The Ld Cit A That Such An Increase In The Liability For Sum Of Rs 48 41 204 Has Not Been Explained By The Assessee And Accordingly Same Has Rightly Been Added 12 In Respect Of Interest Amount Also We Are U Nable To Gauge As To Whether This Interest Is An Account Of The Unsecured Loans Or Any Other Secured Loans Taken From The Bank Which Ha S Been Used For The Purpose Of The Assessees Business If These I Nterest I T A No 4371 4419 Del 2010 1358 Del 2013 10 Pertains To Loans For The Business Purpose Then The Sam E Has To Be Allowed But Here The Assessee Is Unable To Show That The Interest Amounting To Rs 1 06 022 Is For The Payment On Accou Nt Of Loan Which Is Allowable U S 36 1 Iii Accordingly The Order Of The Assessing Officer And Ld Cit A Are Confirmed And Resultantly Ground No 4 Is Also Dismissed 13 Before Us The Learned Counsel Mr S R Wadhwa H Ad Pleaded That Assessee Had Huge Brought Forward Losses And Unabsorbed Depreciation The Set Off Which Has Not Bee N Given By The Assessing Officer Before The Ld Cit A The Asse Ssee Has Taken A Specific Ground Which Ld Cit A Was Pleased To Gi Ve Direction To The Assessing Officer To Allow The Same After Verifyin G From The Records The Relevant Ground And The Observation Of Th E Ld Cit A On This Issue Reads As Under 5 Ground No 6 Of The Appeal Is As Under That On Facts And In The Circumstances Of The Case The Ld Ao Has Grossly Erred In Not Setting Off Of Brought For Warded Losses And Unabsorbed Depreciation Against Current Years Income As Required Under Sub Section 2 Of Section 32 And Su B Section 1 Of Section 72 Of The Income Tax Act 1961 In Spite Of Furnishing Copies Of Assessment Orders Proof Of Filing Income Tax Returns For A Y 1995 96 To 2001 02 5 1 During The Proceedings Before Me It Was Submi Tted That The Assessing Officer Has Not Given Set Off Of Brought Forward Losses From Assessment Years 1995 96 To 2001 02 As Requir Ed U S 32 1 And 72 1 Of The Act It Was Further Added Th At As Per The Appellants Records Brought Forward Losses Are Of Rs 156 85 76 114 5 2 I Have Carefully Considered The Written Submis Sions Of Ld Ar There Is No Discussion In The Assessment Order Regarding The Issue Of Brought Forward Losses However In View Of The Submissions Of Ld Ar The Assessing Officer Is Dir Ected To Records And Make Necessary Computation As Per The P Rovisions Of The Act I T A No 4371 4419 Del 2010 1358 Del 2013 11 14 Mr Wadhwa Submitted That Till Date Assessing Officer Has Not Carried Out The Directions Of The Ld Cit A Ld D R Submitted That The Direction Can Be Given To The Assessing Officer To Examine This Issue In The Light Of The Order Of The Ld Cit A And Decided Expeditiously 15 Accordingly We Direct The Assessing Officer Th At Brought Forward Losses And Unabsorbed Depreciation The Detail S Of Which Has Been Given By The Learned Counsel Before Us In Th E Written Submission May Be Examined And Set Off Should Be Gi Ven Against The Income Assessed For This Year In Accordance With Law Thus This Plea Of The Learned Counsel Is Accepted And Allo Wed For Statistical Purposes 16 In The Result The Appeal Of The Assessee Is Dismis Sed 17 In Revenues Appeal Following Grounds Have Bee N Raised 1 The Ld Cit A Has Erred On Facts And In Law In Directing The Assessing Officer To Verify And Allow Depreciation On Assts W Hich Are Included In The Block Of Assets And Were Used For The Purpose Of Bu Siness In Earlier Years Ignoring That A Once The Individual Asset Is Not Put To Use Which I S Prerequisite Condition For Availing Depreciation U S 32 Of The I Ncome Tax Act 1961 The Same Becomes Ineligible Disqualified For Block Of A Ssets On Which Depreciation Is Allowed As Per Rule 5 And Appedix I A Of The Income Tax Rules 1962 But Shall Continue To Remain The Part Of The Block Of Assets For All Other Purpose Except For The Purpose Of Cla Iming Depreciation Unless Put To Use B In The Case Of Cit Vs Oriental Coal Co Ltd 1994 206 Itr 682 78 Taxman 240 Cal It Has Been Observed By The Honbl E High Court That Where Assets Were Not At All Used Due To Lock Out Depreciation Cannot Be Allowed Reliance Is Also Placed On The Decisions I N Liquidators Of Pursa Ltd Vs Cit 1954 25 Itr 265 Sc Dcit Vs Yellam Ma Dasappa Hospital 2007 159 Taxman 58 290 Itr 353 Kar And Cit Vs Suhrid Geigy Ltd 1982 133 Itr 884 Guj Cit Vs Jiwaji Rao Sugar Co Ltd 1969 71 Itr 319 Mp App I T A No 4371 4419 Del 2010 1358 Del 2013 12 16 The Brief Facts Qua The Aforesaid Ground Are That Assessee Company Has Claimed Depreciation Of Rs 59 99 297 O N Plant And Machinery And Rs 36 395 On Distribution Equipment The Assessing Officer From The Perusal Of Audit Report Note D That Auditors Have Commented That During The Year Due To Discontinuance Of The Main Activity Of The Company They Are Not In A Position To Comment On The Verification Of The Assets By The Management Or Any Discrepancy Thereof Held That Sinc E There Was No Business Activity In This Year Therefore No Depreciation Is Allowable Accordingly He Allowed The Claim Of Depr Eciation Of Rs 60 35 692 17 Before The Ld Cit A The Assessee Submitted That I T Has Earned Gross Income Of More Than Rs 14 Lacs Shown Un Der The Head Other Income In The Profit And Loss Account And Till Last Year Assessees Turnover Was More Than Rs 1 99 Crore And Other Income Was Rs 17 16 Lacs All These Plant And Machin Ery Are Part Of The Block Of Assets And Therefore It Cannot Be Hel D That They Were Not Put To Use In This Year Simply Because Manage Ment Could Not Certify The Figures To The Auditors Mere Suspensio N Of A Business Activity Does Not Mean That Business Has Bee N Closed Down And Assessee Would Be Ineligible For Claim Of Depreciation On The Assets Which Were Kept Ready For Use Reliance Was Placed On The Following Decisions I Cit Vs Refrigeration Allied Industries Ltd 247 Itr 12 Ii Cit Vs Geotech Construction Corporation 24 4 Itr 452 Iii Capital Bus Services P Ltd 123 Itr 404 18 Ld Cit A After Referring To The Judgments Of Ho Nble Delhi High Court In The Cases Viz Cit Vs Bharat A Luminium Co I T A No 4371 4419 Del 2010 1358 Del 2013 13 Ltd 187 Taxman 111 And Cit Vs Yamaha Motor India P Ltd 226 Ctr 304 Held That In The Concept Of Block Of Ass Ets Used For The Purpose Of Business Would Mean Use Of Block Of Asset And Not An Individual Asset If The Plant And Machinery Forms Part Of Block Of Assets In The Earlier Year And Were Used For The P Urpose Of Business From The Earlier Years Then The Same Cannot Be Disallowed He Directed The Assessing Officer To Veri Fy From The Records And Allow The Depreciation Only On Those Assets Which Were Used For The Purpose Of Business In The Earlier Years And Formed Part Of The Blocks Of Assets 19 Before Us Ld D R Submitted That If The Assessee H As Not Used The Asset For The Purpose Of Business In This Yea R Then Depreciation Cannot Be Allowed And In Support He Refer Red To One Judgment Of Calcutta High Court In The Case Of Cit Vs Punjab Coal Co Ltd Reported In 1994 76 Taxman 240 He H Ad Also Referred A Judgment Of Honble Delhi High Court In Th E Case Of Cit Vs 2012 Agro Mills Ltd Reported In 341 Itr 647 Thus He Submitted That Assessing Officer Has Rightly Disallowed The Depreciation 20 Ld Counsel On The Other Hand Strongly Relied Upon The Order Of Cit A And Also Relied Upon The Judgments Of Var Ious Courts On This Point 21 After Considering The Submissions Made By Th E Parties And On Perusal Of The Material Referred To Before Us We Find That It Is Not In Dispute That Plant And Machinery On Which Depreci Ation Has Been Disallowed By The Assessing Officer Formed Part Of The Assets Utilized For The Purpose Of Business By The Asse Ssee In The I T A No 4371 4419 Del 2010 1358 Del 2013 14 Earlier Years And The Depreciation On Such Block Of A Ssets Have Been Allowed After The Concept Of Block Of Assets B Rought In The Statute By Clause C Of Sub Section 6 Of Section 43 W E F 01 04 1998 The Concept Of Individual Assets Has Lost Its Relevance And No Longer Stands Though As Per Section 32 1 In Order To Claim Depreciation Not Only The Asset Should Be Owned B Y The Assessee But It Should Also Be Used For The Purpose Of Business Or Profession However Here The Concept Used For The Pu Rpose Of Business When Applied To Block Of Assets Then What Is Required To Be Seen Is Whether Such Block Of Assets Had Been Used For The Business In The Earlier Years Or Not If Answer Is A Ffirmative Then The Same Has To Be Allowed Because The Individual Ass Et Loses Its Identity This Proposition Has Now Been Well Settled By The Honble Jurisdictional High Court In The Case Of Cit Vs Bharat Aluminium Co P Ltd Supra Apart From That The Judgment As Relied Upon By The Ld D R In The Case Of Cit Vs Oswal Agro Mills Ltd Supra The Honble High Court Has In Fact Allowed T He Depreciation On The Block Of Assets Even When There Was A Passive User The Relevant Portion Of The Said Judgment Can Be Summarized As Under After The Amendment Of Section 32 Of The Income Tax Act 1961 By The Taxation Laws Amendment And Miscellaneous Prov Isions Act 1986 Section 32 1 Of The Act Allows Depreciation On The Written Down Value Of A Block Of Assets Section 2 11 Of T He Act Defines The Term Block Of Assets Along With The Amendment T He Definition Of Written Down Value As Contained In Section 43 6 Was Also Amended Thus For The Assessment Year 1998 99 The Written Down Value Of Any Block Of Assets Shall Be The Aggr Egate Of The Written Down Value Of All The Assets Falling Within That Block Of Assets At The Beginning Of The Previous Year From This Adjustment Has To Be Made For The Increase Or Reduction In The Block Of Assets During The Year Under Consideration The Deduction From The Block Of Assets Has To Be Made In Respect Of Any Asset S Old Discarded Or I T A No 4371 4419 Del 2010 1358 Del 2013 15 Demolished Or Destroyed During The Previous Year T Hus The Depreciation Is Allowed On The Block Of Assets And The Revenue Cannot Segregate A Particular Asset Therefrom On Th E Ground That It Was Not Put To Use Individual Assets Have Lost The Ir Identity And The Concept Of Block Of Assets Has Been Introduce D For Calculating Deprecation Assessees Are Not Required To Maintain Particulars Of Each Asset Separately The Revenue Cannot Claim Tha T For Allowing The Depreciation User Of Each And Every Asset Is E Ssential Even When A Particular Asset Forms Part Of A Block Of A Ssets Moreover The Revenue Is Not Put To Any Loss By Allowing Depr Eciation On A Particular Asset Forming Part Of The Block Of Ass Ets Even When That Particular Asset Is Not Used In The Relevant A Ssessment Year As Whenever Such An Asset Is Sold It Would Result In Short Term Capital Gains Which Would Be Exigible To Tax The Court Cannot Give An Expression A Meaning Which Would Make The Provision Superfluous For Six Assessment Years Beginning From 1998 99 Th E Assessing Officer Denied The Assessee Depreciation In Respect Of Its Bhopal Unit On Assets Forming Part Of A Block Of Assets O N The Ground That The Unit Was Closed Throughout The Years This Was Confirmed By The Commissioner Appeals But The Tribunal Allowed Depreciation On Two Grounds That There Was A Passive User Of Th E Assets At The Bhopal Unit Which Could Be Treated As Used For Th E Purpose Of Business And That The Assets Of The Bhopal Unit Co Uld Not Be Segregated For The Purpose Of Allowing Depreciation And Depreciation Had To Be Allowed On The Entire Block Of Assets On Appeal Held Accordingly That While The Tribunal Was Not Right In Holding That There Had Been Passive User Of The Asset Beca Use In The Six Years Till The Last Assessment Year In Question The Re Was No Sign Of This Unit Becoming Functional And Passive User I N These Circumstances Could Not Be Extended To Absurd Limi Ts Otherwise The Words Used For The Purpose Of Business Would Lose Their Total Sanctity The Tribunal Was Right In Allowing Deprec Iation Based On The Block Of Assets 22 Thus Respectfully Following The Aforesaid Judgme Nt We Uphold That Ld Cit A Has Rightly Allowed The Depre Ciation On Such Block Of Assets And In Any Case The Depreciatio N Claimed On I T A No 4371 4419 Del 2010 1358 Del 2013 16 Wdv Has To Be Allowed The Grounds Raised By The Rev Enue Are Thus Dismissed 23 Now We Will Come To The Appeal For Assessment Yea R 2009 10 Wherein The Following Grounds Have Been Raised By The Assessee 1 The Order Of The Ld Cit A Dated 19 12 2012 Is Ba D In Law And On Facts 2 On The Facts And In The Circumstances Of The Case The Ld Cit A Has Erred In Confirming The Disallowance Of Depreci Ation On Plant Machinery 3 On The Facts And In The Circumstances Of The Case The Ld Cit A Has Erred In Confirming The Disallowance Of Adminis Trative Expenses Of Rs 3 52 978 Claimed By The Assessee 24 So Far As The Ground No 2 Is Concerned Both The P Arties Have Admitted That This Issue Is Same Which Has Been Ra Ised In The Revenues Appeal I E Disallowance Of Depreciation On Certain Plant And Machinery Which Were Part Of Block Of Ass Ets Allowed In The Earlier Years The Same Has Been Disallowed By Th E Assessing Officer And Confirmed By The Ld Cit A Mainly On The Ground That The Business Activities Of The Assessee Has Been Discon Tinued Since This Issue Is Similar To The Ground Raised In The Assessment Year 2002 03 Therefore On The Same Reasoning We A Llow The Depreciation On The Plant And Machinery Forming Part O F The Block Asset Allowed In The Earlier Years Thus Ground No 2 Is Allowed 25 So Far As The Issue Of Disallowance Of Administra Tive Expenses Of Rs 3 52 978 Is Concerned We Find That The Details As Given In The Schedule To Profit Loss Account The M Ajor Expenses Are Legal Expenses Of Rs 85 000 Audit Fee Of Rs 9 7550 And Office Maintenance Of Rs 45 875 Besides Some Misc Ellaneous I T A No 4371 4419 Del 2010 1358 Del 2013 17 Other Expenses These Have Been Disallowed By The Ass Essing Officer And Confirmed By The Ld Cit A On The Grou Nd That Business Activities Have Not Been Carried Out By The A Ssessee And Therefore Such Expenses Cannot Be Allowed 26 Before Us The Learned Counsel Submitted That The Co Rporate Structure Of The Assessee Is Still Continuing And Asse Ssee Was Required To Carry Out Statutory Audit Of Its Books Of Acc Ount And Other Activities For Which It Had Paid Audit Fees And Ha S Also Incurred Legal Expenses For The Purpose Of The Busine Ss And Also These Expenses Were Necessitated For Protection Of The P Roperty Of The Company And Day To Day Running Of The Company Thu S Same Cannot Be Disallowed 27 On The Other Hand Ld D R Strongly Relied Up On The Order Of The Assessing Officer And Ld Cit A 28 From The Perusal Of The Impugned Order As Well As Finding Given By The Learned Assessing Officer And Ld Cit A We Find That The Corporate Office Of The Assessee Is Still Being Mai Ntained In This Year Along With Other Infrastructures And Activities Even Though Main Business Activity Has Been Discontinued In So F Ar As Expenses Like Legal Expenses Audit Fees Office Mai Ntenance And Other Minor Administrative Expenses Are Concerned It C Annot Be Held That The Same Is To Be Disallowed Because The Exp Ression For The Purpose Of Business Is Much Wider In Scope Than For The Purpose Of Earning Profit And To Maintain The Corpora Te Structure And Preservation Of The Business Such Expenses Are R Equired Which Needs To Be Allowed Before Us The Learned Cou Nsel Has Relied Upon The Judgment Of Honble Bombay High Cour T In The I T A No 4371 4419 Del 2010 1358 Del 2013 18 Case Of Sahakari Shakkar Karkhana Vs Cit Ii 229 Itr 577 Wherein It Was Held In The Following Manner So Far As The Scope And Ambit Of The Expression Fo R The Purposes Of The Business Is Concerned It Is Well Settled By The Decision Of Th E Supreme Court In Cit Vs Malayalam Plantations Ltd 1964 53 Itr 140 Sc That The Expression For The Purpose Of The Business Is Wider In Scope Than The Expression For The Purpose Of The Earning Profits Its Range Is Wide It May Tak E In Not Only The Day To Day Running Of A Business But Also The Rationalisation Of Its Administration And Modernisation Of Its Machinery It May Include Meas Ures For The Preservation Of The Business And For The Protection Of Its Assets A Nd Property From Expropriation Coercive Process Or Assertion Of Hostile Title It May Also Comprehend Payment Of Statutory Dues And Taxes Imposed As A Pre Condition To Commence Or For The Carrying On Of A Business It May Comprehend Many O Ther Acts Incidental To The Carrying On Of A Business The Only Limitation Is T Hat The Purpose Should Be For The Purpose Of The Business That Is To Say The Expend Iture Incurred Should Be For The Carrying On Of Business And The Assessee Should Inc Ur It In His Capacity As A Person Carrying On The Business 29 Thus If We Apply The Said Principle In The Afore Said Case We Do Not Find Any Reason To Sustain The Disallowance Of Administrative Expenses Amounting To Rs 3 52 978 An D Same Is Directed To Be Deleted 30 Before Us The Learned Counsel Had Submitted That Assessing Officer May Be Directed To Set Off The Carr Y Forward Brought Forward Losses In The Form Of Business Loss A Nd Unabsorbed Depreciation Pertaining To The Earlier Asses Sment Years As Claimed In The Return Of Income We Accordi Ngly Direct The Assessing Officer To Verify From The Records The Cl Aim Of The Assessee And If Any Brought Forward Loss And Unabsor Bed Depreciation Has Been Claimed In The Return Of Income Coming From The Earlier Years And Such Claim And Quantificati On Is Correct Then The Same Should Be Allowed In Accordance With La W Accordingly The Appeal Of The Assessee Is Allowed I T A No 4371 4419 Del 2010 1358 Del 2013 19 31 In The Result The Appeal Of The Revenue As Well As The Appeal Of The Assessee For The Assessment Year 2002 03 Is Dismissed Whereas The Appeal Of The Assessee For The Assessment Year 2009 10 Is Allowed Order Pronounced In The Open Court On 18 Th December 2017 Sd Sd O P Kant Amit Shukla Accountant Member Judicial Member Dated 18 Th December 2017 Pkk