M/S. PFIZER LTD, Mumbai v. THE DY CIT RG 8(2), Mumbai

ITA 8821/MUM/2004 | 2001-2002
Pronouncement Date: 18-03-2010 | Result: Allowed

Appeal Details

RSA Number 882119914 RSA 2004
Assessee PAN AAACP3334M
Bench Mumbai
Appeal Number ITA 8821/MUM/2004
Duration Of Justice 5 year(s) 3 month(s) 12 day(s)
Appellant M/S. PFIZER LTD, Mumbai
Respondent THE DY CIT RG 8(2), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 18-03-2010
Date Of Final Hearing 09-02-2010
Next Hearing Date 09-02-2010
Assessment Year 2001-2002
Appeal Filed On 06-12-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 8821/MUM/2004 (ASSESSMENT YEAR: 2001-02) M/S. PFIZER LIMITED DCIT RANGE 8(12) PFIZER CENTRE JOGESHWARI (W) AAYAKAR BHAVAN MUMBAI 400102 VS. MUMBAI 400020 PAN - AAACP 3334 M APPELLANT RESPONDENT APPELLANT BY: SHRI R. MURALIDHAR RESPONDENT BY: SHRI C.P. PATHAK O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- VIII MUMBAI DATED 24.09.2004 WHEREIN THE ASSESSEE HAS RA ISED VARIOUS GROUNDS. THE CIT(A) HAS CONSIDERED THE GROUNDS RAISED IN THI S YEAR UNDER CONSIDERATION WHICH ARE SIMILAR TO IMMEDIATELY PREC EDING ASSESSMENT YEARS 1999-2000 AND 2000-01 WHEREIN HE HAS GIVEN VARIOUS REASONS WHILE DISPOSING OFF THE GROUNDS. ACCORDINGLY HE CONSIDERE D THE PRESENT YEAR APPEAL ALSO IN THE LIGHT OF THE DECISIONS TAKEN IN EARLIER YEARS. IT WAS THE SUBMISSION THAT ORDERS WERE PASSED IN THE EARLIER YEARS BY THE ITAT AND ACCORDINGLY THE ISSUES ARE COVERED. KEEPING IN VIEW OF THE ARGUMENT S OF THE LEARNED COUNSEL AND THE LEARNED D.R. AND ALSO ORDERS OF THE ITAT IN EARLIER YEAR THE GROUNDS ARE CONSIDERED AND DISPOSED OFF AS UNDER. 2. GROUND NO. 1 IS AS UNDER: - THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT FOR T HE PURPOSE OF DEDUCTION ADMISSIBLE UNDER SECTION 80HHC OF THE INC OME-TAX ACT 1961 (THE ACT) THE FIGURE OF BUSINESS INCOME SHOULD N OT INCLUDE 90 PERCENT OF THE AMOUNT OF TRANSIT CLAIM AND CASH DISCOUNT WHICH IS RELATABLE TO THE BUSINESS OF THE APPELLANT. 3. WHILE COMPLETING THE ASSESSMENT AND CONSIDERING THE DEDUCTION UNDER SECTION 80HHC THE A.O. VIDE PARA 4 OF THE O RDER CONSIDERED THE ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 2 DETAILS OF SUNDRY INCOMES AND NOTICED THAT THE INCO ME OF RS.32.50 LAKHS CONSIST OF TRANSIT CLAM OF RS.2.72 LAKHS AND CASH D ISCOUNT OF RS.1.51 LAKHS AND THAT OF SCRAP SALES AND EXCHANGE GAIN. THE ABOV E RECEIPT WAS ALSO CONSIDERED AS NOT DIRECTLY RELATABLE TO BUSINESS. T HEREFORE 90% OF THE SUNDRY INCOME IS REDUCED FROM THE BUSINESS INCOME F OR THE PURPOSE OF COMPUTATION UNDER SECTION 80HHC. THE CIT(A) WHILE EXAMINING THE NATURE OF SUNDRY INCOME HAS CONSIDERED THAT SCRAP SALES A ND EXCHANGE GAIN ARE TO BE CONSIDERED AS PART OF BUSINESS PROFIT WHEREAS TR ANSIT CLAIM AND CASH DISCOUNT ARE ONLY INCIDENTAL TO THE BUSINESS ACTIVI TY AND THEREFORE THE ASSESSING OFFICERS ACTION CANNOT BE UPHELD. THE AS SESSEE IS CONTESTING THE ABOVE TWO ISSUES. 4. THIS ISSUE WAS ALSO CONSIDERED IN EARLIER YEAR BY T HE ITAT VIDE CONSOLIDATE ORDER IN ITA NO. 1825 & 2977/MUM/2003 D ATED 07.08.2006 AND ITA NO. 4591/MUM/2004 DATED 22.08.2008. RESPECT FULLY FOLLOWING THE FINDINGS IN THOSE ORDERS WE DIRECT THAT THE TRANSIT INCOME AND CASH DISCOUNT ARE TO BE CONSIDERED AS PART OF PROFITS OF BUSINESS WHILE ALLOWING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. ACCORDING LY THE GROUND IS ALLOWED. 5. GROUND NO. 2 IS AS UNDER: - THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACT ION OF THE ASSESSING OFFICER (AO) AND THEREBY DISALLOWING THE ESIC PAY MENTS AMOUNTING TO RS.60 110 MADE BY THE APPELLANT WITHIN THE PRESCRIB ED DUE DATES. 6. THE A.O. DISALLOWED THE AMOUNT HOLDING THAT THE AMO UNT IS PAID BEYOND THE DUE DATE PRESCRIBED UNDER THE RELEVANT A CT. HOWEVER HE HAS NOT GIVEN THE DATE OF PAYMENT IN THE ASSESSMENT ORDER. HOWEVER THE CIT(A) RELYING ON THE REPORT OF AUDIT FILED ALONGWITH THE RETURN IN WHICH THE AUDITOR HAS CERTIFIED THAT THE PAYMENT HAVE BEEN MADE AFTER THE DUE DATE UPHELD THE ADDITION. 7. WE HAVE NOT BEEN INFORMED ABOUT THE ACTUAL DATE OF PAYMENT OF THE ABOVE AMOUNTS. IF THE AMOUNTS COVERED BY SECTION 36 (1)(VA) ARE PAID WITHIN THE GRACE PERIOD AS ALLOWED UNDER THAT ACT THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION FOLLOWING THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 3 CASE OF MAHARASHTRA STATE SEED CORPORATION LTD. IN ITA NO. 14 OF 2000. WITH REFERENCE TO THE AMOUNTS COVERED BY 43B I.E. EMPL OYERS CONTRIBUTION THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN VIEW OF THE S UBSEQUENT AMENDMENT TO SECTION 43B CONSIDERED TO BE RETROSPECTIVE IN NATUR E AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS 319 IT R 306 IF PAID BEFORE FILING OF THE RETURN. SINCE THE FACTS ARE NOT ON RE CORD THE A.O. IS DIRECTED TO EXAMINE THE ACTUAL DATE OF PAYMENT AND ALLOW THE SA ME AS DIRECTED ABOVE. GROUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOS E. 8. GROUND NO. 3 PERTAINS TO UNUTILISED MODVAT. THE A.O . MADE AN ADDITION OF RS.59.56 LAKHS AS UNUTILISED MODVAT CRE DIT AVAILABLE IN THE CLOSING STOCK AS ON THE LAST DATE OF ACCOUNTING YEA R. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD OF VALUATION OF CLOSING STOCK AND ACCORDINGLY NO ADDITION NEED TO B E MADE AS THE SAID VALUE IS IN ACCORDANCE WITH THE PROVISIONS OF LAW. WITH R EFERENCE TO THE ALTERNATE CONTENTION THAT IN CASE THE A.O. HAS TO PROCEED THA T MODVAT IS AVAILABLE FOR ADDITION HE SHOULD ALSO TAKE INTO ACCOUNT THE RELA TABLE VALUE OF THE OPENING STOCK AND THEREFORE SHOULD HAVE MADE THE ADJUSTMENT IN THAT RESPECT IN THE VALUATION OF CLOSING STOCK AS WELL. THE CIT(A) HOW EVER RELYING ON THE PROVISIONS OF SECTION 145A DID NOT CONSIDER THE SUB MISSIONS AND DIRECTED THE A.O. TO MAKE THE ADJUSTMENTS TO THE EXTENT PERM ITTED BY THE SECTION 145A WITH REFERENCE TO STOCK PURCHASES SALES AND EXCISE DUTY PAYMENT. IT WAS THE CONTENTION THAT THIS ISSUE REQUIRES RE-EXAM INATION BY THE A.O. IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COUR T IN THE CASE OF CIT VS. MAHAVIR ALLUMINIUM LTD. 297 ITR 77 AND THE DECISIO N OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MAHALAXMI GLASS WORKS P LTD 318 ITR 116 . ACCORDINGLY THE A.O. IS DIRECTED TO RECON SIDER THE ISSUE KEEPING IN VIEW THE ABOVE PRINCIPLES AND MAKING NECESSARY ADJU STMENTS. GROUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSE. 9. GROUND NO. 4 IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF CLAIM FOR DEPRECIATION ON ASSETS LOCATED IN THE ANKLESHWAR P LANT ON THE GROUND THAT SINCE THE OPERATIONS OF THE ANKLESHWAR PLANT W ERE CLOSED DOWN THE ASSETS WERE NOT USED BY THE APPELLANT. ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 4 THE APPELLANT RESPECTFULLY SUBMITS THAT THE DEPRECI ATION IS ALLOWABLE ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS APPEA RING ON THE LASTS DATE OF THE FINANCIAL YEAR AND NOT ON INDIVIDUAL AS SETS AND HENCE THE POSITION ADOPTED BY THE LEARNED CIT(A) IS ERRONEOUS IN LAW. 10. THE A.O. DISALLOWED THE DEPRECIATION ON THE ANKLES HWAR UNIT AMOUNTING TO RS.47 77 031/- HOLDING THAT THE ASSETS WERE NOT PUT TO USE DURING THE YEAR EVEN FOR A DAY ACCORDINGLY DEPRECI ATION CANNOT BE ALLOWED. THE CIT(A) CONSIDERED ASSESSEES SUBMISSION THAT TH ESE ARE FORMING PART OF BLOCK ASSETS UNDER SECTION 43(6) AND ACCORDINGLY TH E ENTIRE BLOCK IS BEING USED AND INDIVIDUAL ASSETS NEED NOT TO BE CONSIDERE D HAS NOT BEEN ACCEPTED AND DECIDED AGAINST THE ASSESSEE BY HOLDING AS UNDE R: - 35. IN THE LIGHT OF THE ABOVE REFERRED DISCUSSION ON THE BASIS THAT THE MACHINERY DURING THE YEAR THOUGH NOT ACTUALLY USED FORMED PART OF THE BLOCK OF ASSET IN REGARD TO THE WRITTEN DOWN VALUE OF WHICH IT IS ENTITLED FOR DEPRECIATION THE CLAIM FOR DEPRECIATION CANNOT BE ALLOWED. THE DISALLOWANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER IN RESPECT OF MACHINERY THAT WAS NOT USED BY THE APPELLANT COMPAN Y IN THE YEAR UNDER CONSIDERATION IS LEGALLY CORRECT AND HENCE IS UPHELD. APPEAL IN RESPECT OF GROUND NO. 6 IS THUS DISPOSED OFF AS DIS MISSED. 11. IT WAS THE CONTENTION THAT THE SAID ASSETS HAVE BEC OME PART OF THE BLOCK AND THE ITAT IN THE CASE OF G.R. SHIPPING LTD . IN ITA NO. 822/MUM/2005 HAS CONSIDERED THE FACTS AND ALLOWED T HE DEPRECIATION. IT WAS ALSO FURTHER INFORMED THAT THE CIT(A) HAS ALLOW ED DEPRECIATION IN A.Y. 2000-01 AND BY REFERRING TO THE ORDERS OF ITAT ALRE ADY ISSUED AND PLACED ON RECORD SUBMITTED THAT THE REVENUE HAS ACCEPTED THE ORDERS OF THE ITAT IN EARLIER YEARS AND HAS NOT CONTESTED THE SAME WHEREA S IN THIS YEAR THE CIT(A) DIFFERED ON ALLOWING THE DEPRECIATION AND ASSESSEE IS IN APPEAL. 12. THE LEARNED COUNSEL ALSO REFERRED TO THE DECISION O F THE ITAT MUMBAI BENCH IN THE CASE OF M/S. SWATI SYNTHETICS LTD. IN ITA NO. 1165/MUM/2006 DATED 17.12.2009 FOR THE PROPOSITION THAT ONCE THE INDIVIDUAL ASSET HAS BECOME PART OF THE BLOCK OF ASSETS THERE IS NO NEED FOR EXAMINING THE USAGE OF INDIVIDUAL ASSETS. 13. THE LEARNED D.R. HOWEVER SUBMITTED THAT THE UNIT IS CLOSED AND THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION AND SUPPO RTED THE ORDER OF THE ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 5 CIT(A) BY RELYING THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT VS. MCDOWELL CO. LTD. 225 CTR 22 (SC). 14. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ORDE RS OF THE A.O. AND THE CIT(A) FOR A.Y. 2000-01 THE CIT(A) HAS ALLOWED DEPRECIATION BY GIVING A FINDING THAT IN THE INSTANT CASE SINCE THE APPELLANT HAS NOT ACQ UIRED THESE ASSETS BUT THESE FORMED PART OF THE WRITTEN DOWN VA LUE OF THE ASSETS OF THE BUSINESS OF THE APPELLANT COMPANY IN THE EARLIER AC COUNTING YEAR NO RESTRICTION OF THE ALLOWABILITY OF THE DEPRECIATION AMOUNT CAN BE IMPOSED IN TERMS OF SAID PROVISO. THE ACTION OF THE ASSESSING OFFICER IN THIS RESPECT IS THEREFORE NOT CORRECT AND HENCE CANNOT BE SUSTAINED . ACCORDINGLY THE CIT(A) HAS ALLOWED THE DEPRECIATION ON THE ANKLESHWAR UNIT . THE ISSUE IN THAT YEAR WAS THAT THE UNIT WAS CLOSED PRIOR TO 30.09.1999 AN D THE A.O. HAS RESTRICTED DEPRECIATION TO 50% OF THE ELIGIBLE AMOUNT AS THE S AME WAS NOT PUT TO USE FOR MORE THAN 180 DAYS DURING THE YEAR. IN THAT CON TEXT THE CIT(A) HAS OBSERVED THAT THE FIRST PROVISO DOES NOT APPLY TO T HE FACTS OF THE CASE. HOWEVER DURING THE YEAR THE ENTIRE UNIT WAS NOT PU T TO USE BUT SINCE THE SAME IS FORMING PART OF THE BLOCK OF ASSETS OF THE MACHINERY OF THE ENTIRE COMPANYS OTHER UNIT BEING USED EXAMINATION OF USE OF INDIVIDUAL ASSETS DOES NOT ARISE. IN THE CASE OF M/S. SWATI SYNTHETIC S LTD. THE COORDINATE BENCH IN ITA NO. 1165/MUM/2006 HAS EXAMINED THE ENT IRE CASE LAWS ON THE ISSUE AND OBSERVED AS UNDER IN PARA 7.15 OF TH E ORDER: - 7.15 IN THE LIGHT OF ABOVE DISCUSSIONS THE CONDITI ON/ REQUIREMENT OF SECTION OF WORD USED FOR THE PURPOS E OF BUSINESS AS PROVIDED IN SECTION 32 OF (1) OF THE ACT FOR THE CONCEPT OF DEPRECATION ON BLOCK OF ASSETS CAN BE SUMMARIZED THAT USE OF INDIVIDUAL ASSET FOR THE PURPOSE OF BUSINESS CAN BE EXAMINED ONLY IN THE FIRST YEAR WHEN THE ASSET IS PURCHASED. IN SUBSEQUENT YEARS USE OF BLOCK OF ASSE TS IS TO BE EXAMINED. EXISTENCE OF INDIVIDUAL ASSET IN BLOCK OF ASSET ITSELF AMOUNTS TO USE FOR THE PURPOSE OF BUSI NESS. THIS VIEW IS FULLY SUPPORTED BY VARIOUS PROVISIONS OF THE ACT WHICH WERE AMENDED CONSEQUENCE TO THE SCHEME OF DEP RECIATION ON BLOCK OF ASSET INCLUDING TO PROVISO TO SECTION 3 2 OF THE ACT OF WHICH DETAILED DISCUSSION IS MADE IN ABOVE PARA OF THIS ORDER. THE SAID PROVISO TO SECTION 32 REQUIRES THAT WHER E AN ASSET IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR A ND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVI OUS YEAR ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 6 THE DEDUCTION UNDER THIS SUB-SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA)] AS THE CASE MAY BE. WHEN AN ASSET PURCHASED IS SATISFIED THE ABOVE CONDITION IN THE Y EAR OF PURCHASE THAT ASSET WILL BE INCLUDED IN THE RESPECT IVE BLOCK OF ASSET. DEPRECATION FOR THAT YEAR WILL BE CALCULATED ON WRITTEN DOWN VALUE IN ACCORDANCE WITH SECTION 43(6) OF THE ACT BY THE INCREASE OPENING WDV BY THE ACTUAL COST OF ANY ASSE T FALLING WITHIN THAT BLOCK ACQUIRED DURING THE PREVIOUS YEA R. ONCE AN ASSET IS INCLUDED IN THE BLOCK OF ASSETS ITS REMAI NED IN BLOCK FOR ITS ENTIRE LIFE. THE END OF ASSET I.E. TO GO OUT FR OM BLOCK IS ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THERE AR E FOLLOWING THREE SITUATIONS PROVIDED IN THE STATUTES WHEN AN I NDIVIDUAL ASSET OF THE BLOCK GOES OUT OF BLOCK:- 1) AN ASSET IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR AS PROVIDED IN SECTIONS 4 3(6)(C)(I)(B) AND 32(1)(III) OF THE ACT . 2) AN ASSET NOT EXCLUSIVELY USED FOR THE PURPOSES O F THE BUSINESS OR PROFESSION BUT USED OTHER THEN BUSINE SS PURPOSES AS PROVIDED IN SECTION 38(2) OF THE ACT. 3) WHERE ANY BLOCK OF ASSETS DOES NOT CEASE TO E XIST BUT THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF THE TRANSFER OF THE DEPRECIABLE ASSETS BY THE AS SESSEE DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF T HE AMOUNTS STATED IN SECTION 50 OF THE ACT AND WHERE A NY BLOCK OF ASSETS CEASES TO EXIST FOR THE REASON THAT ALL T HE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PREVIOUS YEAR . 15. AFTER CONSIDERING THE ABOVE THE ITAT HELD IN PARA 7.16 AS UNDER: - 7.16 IN THE CASE UNDER CONSIDERATION THE ADMITTED FACTS ARE THAT THE DIVISION OF SURAT HAD BEEN CLOSED BUT THE BLOCK OF ASSETS OF THE CLOSED UNIT ( THE DIVISION OF SURAT) ALONG WITH OTHER ASSETS OF THE BLOCK WERE USED FOR THE PURPOSE OF BU SINESS IN EARLIER YEARS. THE YEAR UNDER CONSIDERATION IS NOT THE FIRST YEAR OF THE ASSETS ACQUIRED. THE ASSETS OF CLOSED UNIT S TILL REMAINED EXIST/PART OF THE BLOCK OF ASSETS. THE ASSETS DID N OT FALL UNDER ANY OF THE ABOVE EXCEPTIONAL THREE CONDITIONS. THE SAID BLOCK OF ASSETS WAS USED FOR THE PURPOSE OF BUSINESS DURING THE YEAR. UNDER THE CIRCUMSTANCES THE ASSETS OF THE SAID CLOS ED UNIT AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS IN THE Y EAR UNDER CONSIDERATION WE ARE THEREFORE OF THE CONSIDERE D VIEW THAT THE ASSESSEE IS ENTITLED FOR DEPRECATION. WE ACCORDINGL Y ALLOW THE CLAIM OF THE ASSESSEE. 16. SIMILAR FACTS EXIST IN ASSESSEES CASE ALSO. NOT ON LY THAT IN THE CASE OF G.R. SHIPPING LTD. VS. DCIT IN ITA NO. 822/MUM/2005 SIMILAR ISSUE WAS ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 7 CONSIDERED WHEREIN ONE OF THE BARGES JAY II WHICH WAS SUNK DURING THE YEAR WAS CONSIDERED FOR DEPRECIATION AND THE ITAT H AS ALLOWED IN PARA 10 11 AND 12 AS UNDER: - 10. THE LEGISLATURE FELT THAT KEEPING THE DETAILS WITH REGARD TO EACH AND EVERY DEPRECIABLE ASSETS WAS TIME CONSUMING BOT H FOR THE ASSESSEE AND THE ASSESSING OFFICER. THEREFORE THEY AMENDED THE LAW TO PROVIDE FOR ALLOWING OF THE DEPRECIATION ON THE ENTIRE BLOC K OF ASSETS INSTEAD OF EACH INDIVIDUAL ASSETS. THE BLOCK OF ASSETS HA ALSO BEEN DEFINED TO INCLUDE THE GROUP OF ASSETS FAILING WITH THE SAME C LASS OF ASSETS. HENCE AFTER THE AMENDMENT WITH EFFECT FROM 01.04.1988 TH E INDIVIDUAL ASSETS HAVE LOST ITS IDENTIFY AND FOR THE PURPOSE OF ALLOW ING OF DEPRECIATION ONLY THE BLOCK OF ASSETS HAS TO BE CONSIDERED. IF A BLOC K OF ASSETS IS OWNED BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS DEPRECIATION WILL BE ALLOWED. THEREFORE THE TEST OF USER HAS TO BE APPL IED UPON THE BLOCK AS A WHOLE INSTEAD OF UPON AN INDIVIDUAL ASSET. 11. THE ABOVE PRINCIPLE HAS BEEN LAID DOWN IN THE F OLLOWING DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE NAM ELY; (A) NOTCO EXPORTS. VS. DCIT 86 ITD 445 (HYD.) (B) ACIT VS. SRF LTD. VOL. 21SOT 122 (DEL.) & (C) UNITEX PRODUCTS LTD. VS. ITO VOL. 22 SOT 429 (MUM.) 12. THE LD. DR HOWEVER SUBMITTED THE USER WAS A CON DITION FOR ALLOWING DEPRECIATION AND IN THIS REGARD RELIED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DINESHKUMA R GULABCHAND AGARWAL VS. CIT 267 ITR 768 (BOM). WE HAVE PERUSED THE AFORESAID DECISION AND ARE OF THE VIEW THAT THE SAME IS NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE THE ASSES SEE HAS ALREADY USED THE ASSET FOR THE PURPOSE OF BUSINESS. THE ASSET HA S ALREADY ENTERED THE BLOCK OF ASSETS. IN THE CASE BEFORE THE HON'BLE BOM BAY HIGH COURT THE ASSET IN QUESTION WAS NOT AT ALL PUT TO USE. WE THE REFORE FIND THE DECISION RELIED UPON THE LD. DR IS OF NO ASSISTANCE TO THE PLEA OF THE DR. RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNA L REFERRED TO ABOVE WE HOLD THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPREC IATION AND THE ASSESSING OFFICER DIRECTED TO ALLOW THE SAME. 17. THIS ORDER WAS UPHELD BY THE HON'BLE BOMBAY HIGH CO URT IN ITA NO. 598 OF 2009 DATED 28 TH JULY 2009 BY FOLLOWING THE JUDGEMENT IN THE CASE O F WHITTLE ANDERSON LTD. VS. CIT 79 ITR 613 AND IN THE CASE OF CIT VS. G.N. AGARWAL (INDIVIDUAL) 217 ITR 250. IN VIEW OF THIS SINCE THE ASSETS HAVE BECOME PART OF THE BLOCK OF ASSETS THE ASSESSEE IS ENTITLED TO DEPRECIATION. THE LEARNED D.R.S RELIANCE ON THE DECISION OF CIT VS. MCDOWELL COMPANY LTD. 224 CTR 22 IS NOT DIRECTLY APPLICABLE HERE. IN THE ABOVE SAID CASE THE STAND OF THE REVENUE WAS THAT MACHINERY IN RESPECT OF R&D SECTION WAS ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 8 RELATED TO THE FAST FOOD UNIT WHICH WAS CLOSED AND THEREFORE WAS NOT ENTITLED TO ANY DEPRECIATION BECAUSE THERE IS NO ACTUAL USAG E OF THE MACHINERY. THE STAND OF THE ASSESSEE ON THE OTHER HAND WAS THAT THE MACHINERY WAS USED IN RESPECT OF FAST FOOD AND LIQUOR UNITS. THE HON'B LE SUPREME COURT HELD THAT THE BASIC ISSUE IS WHETHER IT RELATE TO BOTH T HE UNITS OR ONLY TO FAST FOOD UNIT WHICH WAS ULTIMATELY CLOSED HAS NOT BEEN EXAM INED IN DETAIL. THEREFORE THE MATTER WAS REMITTED TO THE A.O. TO EXAMINE THIS ASPECT. SINCE THE ISSUE BEFORE THE HON'BLE SUPREME COURT WAS WITH REFERENCE TO USE OF R&D MACHINERY PERTAINING TO LIQUOR AS WELL AS FOOD BUSI NESS THE SAME WAS RESTORED BACK TO THE A.O. FOR EXAMINING THE FACTUAL ASPECTS. HOWEVER IN THIS CASE THE ANKLESHWAR UNIT WAS BEING USED FOR ASSESS EES BUSINESS AND THESE ARE FORMING PART OF THE BLOCK OF ASSETS AND SO THE UNIT IS DEEMED TO HAVE BEEN USED FOR THE PURPOSE OF BUSINESS AND EXAMINATI ON OF USAGE OF INDIVIDUAL ASSETS FORMING BLOCK OF ASSETS DOES NOT ARISE ON THE LEGAL PRINCIPLES DISCUSSED ABOVE. IN VIEW OF THIS WE DIRE CT THE A.O. TO ALLOW THE DEPRECIATION. 18. GROUND NO. 5 PERTAINS TO HOLDING OF RENTAL INCOME F ROM SUB-LEASING OF PROPERTY AS INCOME FROM BUSINESS AND NOT INCOME FRO M HOUSE PROPERTY AS CLAIMED BY THE APPELLANT. 19. THIS ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSE SSEE VIDE ORDER OF THE ITAT IN ITA NO. 1825/MUM/2003 FOR A.Y. 1998-99 WHER EIN VIDE PARA 5 THE FOLLOWING FINDING WAS GIVEN: - 5. THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE RENTAL INCOME FROM SUBLEASING O F PROPERTY WAS INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE P ROPERTY AS CLAIMED BY THE ASSESSEE. THIS ISSUE WAS CONSIDERED BY THE I.T.A.T. MUMBAI F BENCH IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 1996-97 IN ITA NO. 4877/MUM/2001 DATED 24.10.2005. AFTER CONSIDERING THE ISSUE IN DETAIL THE TRIBUNAL HELD THAT A PERSON IS CONSIDERED TO BE A DEEMED OWNER OF THE PROPERTY U/S . 27(IIIB) WHEN AN IMMOVABLE PROPERTY IS ACQUIRED ON LEASE FOR A PERIO D OF MORE THAN 12 YEARS. THE TRIBUNAL SET ASIDE THE MATTER AND REMITT ED BACK THE ISSUE TO THE ASSESSING OFFICER TO EXAMINE WHETHER THE ABOVE LEGAL PROPOSITION COULD BE EXPECTED IF THE TENANCY WAS ON A MONTH TO MONTH BASIS. AS DIRECTED BY THE TRIBUNAL THE ASSESSING OFFICER LOO KED INTO THE MATTER AND FOUND THAT THE TENANCY WAS NOT A MONTH TO MONTH BASIS AND THEREFORE THE INCOME HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY ITA NO. 8821/MUM/2004 M/S. PFIZER LIMITED 9 AS DIRECTED BY THE TRIBUNAL. THEREFORE THROUGH THE PROCEEDINGS DATED 27.12.2005 THE ASSESSING OFFICER HAS GIVEN EFFECT T O THE ORDER OF THE TRIBUNAL AFTER ENQUIRIES AND ALLOWING THE CLAIM OF THE ASSESSEE. IN VIEW OF THE ABOVE WE ALLOW THE CONTENTION OF THE ASSESS EE AND DIRECT THE ASSESSING OFFICER TO TREAT THE INCOME AS INCOME FRO M HOUSE PROPERTY. 20. SINCE THE A.O. HAS ACCEPTED THE FACT THAT THE ASSES SEE IS TO BE CONSIDERED DEEMED OWNER IN VIEW OF THE DECISION OF THE ITAT IN THE ASSESSMENT YEARS 1998-99 1999-2000 & 2000-01 THE IS SUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THE GROUND I S CONSIDERED ALLOWED. A.O. IS DIRECTED TO TREAT THE INCOME AS INCOME FROM HOUSE PROPERTY. 21. GROUND NO. 6 IS WITH REFERENCE TO CHARGING OF INTER EST UNDER SECTION 234D ON REFUND GRANTED PRIOR TO THE INTRODUCTION OF SECTION 234D W.E.F. JUNE 1 2003. THIS ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ITO VS. EKTA PROMOTERS P. LTD. 305 ITR (AT) 1 (DEL) (SB). ACCORDINGLY THE A.O. IS DIRECTED TO WIT HDRAW THE INTEREST LEVIED ON THE REFUND ISSUED PERIOD TO 01.06.2003. THE GROUND IS CONSIDERED ALLOWED. 22. IN THE RESULT APPEAL IS CONSIDERED ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH 2010. SD/- SD/- (D.K. AGARWAL) (B. RAM AKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 18 TH MARCH 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII MUMBAI 4. THE CIT VIII MUMBAI CITY 5. THE DR I BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.