(1) (3) ITXA 2088/13 IN HIGH COURT OF JUDICATUR E AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Amk rt INCOME TAX APPEAL NO. 2088 OF 2013 ou Commissioner of Income Tax 7 .. Appellant Vs. M/s. Sonic Biochem Extractions Pvt. Ltd. .. Respondent C Mrs. S. V. Bharucha for Appellant. Mr. K. Shivram, Sr. Counsel a/w. Mr. Rahul Hakani for Respondent. CORAM : M.S.SANKLECHA & h G.S. KULKARNI, JJ. ig DATE th : 17 NOVEMBER, 2015. P.C. 1. This appeal by Revenue under Section 260A of Income H Tax Act, 1961 (Act) challenges order dated 20.03.2013 passed by Income Tax Appellate Tribunal (Tribunal). impugned order relates to y Assessment Year 2005 06. ba 2. appellant has raised following questions of law for our consideration: om (a) "Whether on facts and circumstances of case Tribunal is justified in holding that assessee is eligible to claim depreciation in respect of plant & machinery of discontinued business without appreciating fact that basic condition for claiming depreciation B u/s. 32 of Act is "use of asset" for business purpose of assessee? (b) Whether on facts and circumstances of case Tribunal was correct in holding plant and machinery of discontinued business, which is not likely to be revived, in block of asset with ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: (2) (3) ITXA 2088/13 written down value is eligible for claim of depreciation? rt (c) Whether on facts and circumstances of case Tribunal is justified in setting aside issue of assessee's claim of "loss due to ou fire" to file of Assessing Officer without properly appreciating fact that loss is attributable to fixed asset?" C (d) Whether on facts and circumstances of case Tribunal is justified in upholding method adopted by assessee to h devalue closing stock from Rs.14,25,705/ to Rs.1/ without appreciating fact that this method is contrary to provisions of ig section 145A and also accounting standard?" H 3. Re: question Nos.(a) & (b) : (a) respondent assessee had claimed depreciation in respect of its machinery valued at Rs.16.96 lacs which was used in its business of y refining edible oil. machinery had not been used during assessment ba year as respondent has discontinued its business of refining edible oil. above depreciation was claimed on block of assets on written down value including refining edible oil machinery. Assessing om Officer disallowed claim of depreciation on ground that one of twin requirements of ownership and user under Section 32(1)(ii) of Act viz. user was not satisfied. B (b) On appeal Commissioner of Income Tax (Appeals) held that in absence of Machinery being put to use and business of Refining edible oil having been discontinued, respondent is not entitled to depreciation. Thus order of Assessing Officer was undisturbed to extent it disallowed depreciation of Rs.16.96 lacs. ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: (3) (3) ITXA 2088/13 (c) On further appeal to Tribunal impugned order held that rt refining machinery was part of block of assets of plant and machinery. In such case depreciation is granted to entire block of assets whether or ou not individual item therein has been used during subject assessment year. In support impugned order placed reliance upon its decision in case of DCIT Vs. Boskalis Dredging India (P) Ltd. 53 SOT 17 (Mum) C wherein it has been held that once concept of block of assets was brought into effect from assessment year 1989 90 onwards then aggregate of written down value of all assets in block at h beginning of previous year along with additions made to assets in ig subject Assessment Year depreciation is allowable. individual asset looses its identity for purposes of depreciation and user test is to be H satisfied at time purchased Machinery becomes part of block of assets for first time. In circumstances respondent's appeal was allowed and disallowance of depreciation was deleted. y ba (d) Mrs. Bharucha, learned Counsel for revenue fairly states that issue arising herein is identical to issue which arose before Tribunal in Boskalis Dredging India (supra) where also dredger concerned was om part of block of assets and not put to use. On instructions, she further states that Revenue has accepted decision of Tribunal in Boskalis Dredging India (supra) which impugned order has merely followed. No B distinguishing feature in present facts has been pointed out which would warrant taking different view. Besides Tribunal in its order in Boskalis Dredging India (supra) placed reliance upon decision of this Court rendered in appeal filed by Revenue in G. R. Shipping Ltd. being Income Tax Appeal No. 598 of 2009 which was dismissed on 20.07.2008 upholding view of Tribunal on identical issue. Moreover it is clarified ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: (4) (3) ITXA 2088/13 by counsel that refining machinery has itself been sold during next year. rt (e) In above view question Nos.(a) & (b) as formulated do not give ou rise to any substantial questions of law. Accordingly not entertained. C 4. Re: question No.(c) (a) During subject assessment year there was fire in chemical plant of respondent at Pithampur. respondent had debited amount of h Rs.21.68 lacs in its profit & loss account as loss due to fire. This was ig difference between amount claimed for repairs due to fire from Insurance company and that granted. Assessing Officer disallowed H loss claimed to extent of Rs.10.82 lacs being attributable to fixed assets i.e. factory building, plant & machinery. Therefore not revenue in nature. y (b) In appeal, Commissioner of Income Tax (Appeals) did not disturb ba finding of Assessing Officer. On further appeal Tribunal by impugned order accepted respondent's contention that amount returned as loss was revenue in nature as amount claimed and not om granted by Insurance Company was expenditure for repair of factory Building and Plant & Machinery. This expenditure as repairs was allowable as revenue under Sections 30 and 31 of Act in principle. In B circumstances impugned order of Tribunal set aside order of Commissioner of Income Tax (Appeals) and restored issue to Assessing Officer to examine whether expenditure claimed was incurred for repairs of Building and Plant & Machinery affected by Fire. (c) We are informed at Bar that consequent to impugned order of Tribunal, Assessing Officer has now passed order on 31.03.2015 ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: (5) (3) ITXA 2088/13 allowing petitioner's claim for revenue expenditure of Rs.10.82 lacs as being spent for repairs. copy of order dated 31.03.2015 of rt Assessing Officer is handed over across Bar. view taken by Tribunal in principle that amounts spent on repairs has to be allowed ou under Sections 31 and 32 of Act cannot be faulted. (d) Accordingly question as raised does not give rise to C substantial question of law. Therefore question No.(c) is not entertained. h 5. Re: question No.(d) (a) During subject assessment year respondent assessee had ig debited amount of Rs.14.25 lacs in profit and loss account as devaluation of closing stock. This resulted in closing stock being H devalued from Rs.14.26 lacs to Rs.1. This devaluation of part of its closing stock was in respect of packing material which were used for goods which were non moving items. This resulted in packing material had remaining y unsold in its possession for long period of time and had now become ba obsolete. Assessing Officer did not accept devaluation of closing stock to Rs.1/ holding that same is contrary to Section 145A of Act. om (b) On appeal, Commissioner of Income Tax (Appeals) did not disturb findings of Assessing Officer on ground that details of subsequent sale of stock were not furnished. On further appeal, B Tribunal by impugned order held that on basis of record available that packing material which had been devalued had batch Nos. price etc., already printed thereon and these were not used and could not be used now due to lapse of time, thus making it of no value. impugned order further records that packing material incapable of use would be subsequently sold as scrap, if it is not destroyed. In case of sale consideration for ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: (6) (3) ITXA 2088/13 same could be reflected in future and offered to tax. impugned order also placed reliance upon its decision in Emersons Process rt Management India (P.) Ltd. Vs. Additional Commissioner of Income tax, Range 3(1), Mumbai [2011] 13 Taxmann.com 149 (Mum) and allowed ou devaluation of closing stock from Rs.14.25 lacs to Rs.1/ as claimed by respondent assessee. C (c) We find that entire exercise of devaluation of stocks is essentially question of fact and before us same is not urged as being perverse. Revenue is contending that it is contrary to Section 145A of Act. h However nothing is shown to us in support of its contentions. Devaluation ig of stock due to obsolescence is feature not unknown to business (See decision of this Court in Alfa Laval India Ltd. Vs. Deputy Commissioner of H Income tax, 266 ITR 418 as upheld by Supreme Court in Commissioner of Income Tax Vs. Alfa Laval (India) Ltd., [2007] 295 ITR 451 (SC). y ba (d) In above circumstances in present facts findings of Tribunal that stock of packing materials had become obsolete warranting reduction in its value is finding of fact not shown to be om perverse. Accordingly question No.(d) does not raise substantial question of law. Thus not entertained. B 6. Accordingly, appeal is dismissed. No order as to costs. (G.S.KULKARNI, J.) (M.S.SANKLECHA, J.) ::: Uploaded on - 21/11/2015 ::: Downloaded on - 15/12/2015 15:20:06 ::: Commissioner of Income-tax-­7 v. M/s. Sonic Biochem Extractions Pvt. Ltd