HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 18 / 2016 PR. Commissioner of Income Tax, Alwar. ----Appellant Versus Gillette India Ltd., SPA-65A, Industrial Area, Bhiwadi. ----Respondent For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 30/10/2017 1. Bay way of this appeal, appellant has challenged judgment and order of Tribunal whereby Tribunal has dismissed appeal preferred by department and has confirmed order passed by CIT(A). 2. This Court while admitting this appeal on 28.03.2017, framed following substantial questions of law: 1. Whether Tribunal was legally justified in deleting disallowance of Rs.53,91,089/- on account of depreciation on assets which were not put to use in year under consideration? 3. Whether Tribunal was legally justified in deleting disallowance of VRS payment of Rs.2,05,62,000/- specifically when assessee itself showed and claimed it as deferred revenue expenditure in books of accounts but in return of income entire amount was claimed u/s 37(1)? 3. Counsel for appellant has contended that both authorities have wrongly deleted disallowance of amount of Rs.53,91,089/- though property was not used by assessee and (2 of 4) [ITA-18/2016] even on second issue Tribunal has committed error in allowing deleting disallowance of VRS payment of Rs.2,05,62,000/- in favour of respondent. 4. However, counsel for respondent has relied upon following judgments in case of D.B. Income Tax Appeal No.349/2011, Commissioner of Income Tax, Alwar vs. Gilleette India Ltd. Global Business Park, Tower-A, Mehroli Road, Gurgoan, decided on 23.05.2017, wherein it has been observed as under:- 5. In so far as issue No.(iii) is concerned, Tribunal relying upon decision of Delhi High Court in case of CIT vs. Bharat Aluminum Company Ltd. 187 Taxman 111, 124(Del.) and in case of CIT vs. Yamaha Motors India Pvt. Ltd. 226 CTR 304 and Gujarat High Court in case of CIT vs. Sonal Gum Industires 322 ITR 542 in para 52 to 56 has held as under: 52. We have heard rival submission and considered them carefully. After considering relevant material along with written submission and various case laws, we find that assessee deserves to succeed. It is fact on record that M/s Duracell batteries India Limited amalgamated with assessee company in A.Y. 2000-01. On amalgamation its plant & Machinery was included in block of plant & Machinery of assessee company. This block was used for purpose of business in A.Y.2000-01 & 2001-02. In A.Y. 2002-03 assessee did not fulfill condition laid down u/s 72A and therefore unabsorbed losses and depreciation of amalgamating company M/s Duracell batteries India Limited which was set off in A.Y. 2000-01 and 2001-02 was withdrawn and offered in income in A.Y. 2002-03. However fact remain is that plant & Machinery of Duracell battery India Limited merged in block of assets of assessee company on its amalgamation and on such block depreciation for A.Y. 2000-01 & 2001-02 was allowed under block concept of depreciation once asset has formed part of block it can t be reduced except by monies payable in respect of any assets falling in that block which is sold or discarded or demolished or destroyed as per section 43(6) of Income tax Act. Money becomes payable in A.Y.2004-05 when such plant & Machinery were sold for Rs.29,98,65,810/- in A.Y. 2004-05 and Rs.1,26,23,967/- in A.Y. 2005-06 when such amount was reduced from block of plant & machinery. example given by Ld. AR in his written note amply illustrate mechanism of allowance of depreciation u/s 32 after block concept of asset. Therefore, notional disallowance of depreciation in respect of plant & machinery of Duracell batteries which formed part of block of assets of (3 of 4) [ITA-18/2016] assessee is not permitted in law. 53. Delhi High court of CIT V/s. Bharat Aluminium Company Ltd. 187 Taxman 111, 124 (Del.) held that though as per section 32(1), in order to get entitled to claim depreciation, asset is to be owned by assessee and it is also be used for purpose of business and profession but this expression when applied to block of assets and not any specific building, machinery, plant or furniture in said block of assets as individual assets loose their identity after becoming inseparable part of block of assets. 54. Gujarat High Court in case of CIT V/s. Sonal Gum Industries 322 ITR 542 held that in relation to block of assets it is not possible to segregate items falling with in block for purpose of granting depreciation or restricting claim thereof. Once it was found that assets were used for prupose of business, it was not necessary that all items falling within plant and machinery have to be simultaneously used for being entitled to depreciation. 55. Delhi High Court in case of CIT V/s. Yamaha Motors India Pvt. Ltd. 226 CTR 304 held that Expression Used for purpose of business in section 32 has to be read harmoniously with expression Discarded occurring in Clause III of sub section (1) thereof. On harmonious reading of these expressions, Used for purpose of business only means that assessee has used machinery for purpose of business in earlier years. Therefore once depreciation was allowed on block of assets in previous year actual user of machinery is not required with respect to discarded machinery and condition for eligibility of depreciation that machinery is used for purpose of business would mean that discarded machine is used for purpose of business in earlier years for which depreciation is allowed. 56. Mumbai ITAT in case of M/s. Swati synthetics Lts. V/s. ITO 2010 TIOI. 78 held that depreciation is allowable on entire block even if some of assets of block have not been used. use of individual asset for purpose of business can be examined only in first year when asset is purchased. In subsequent years use of block of assets is to be examined. 6 Existence of individual assets in block of assets itself amounts to use for purpose of business. 5.1 In view of decisions of two High Courts and one decision of Tribunal, Tribunal has not committed any error and we affirm view taken by Tribunal and also view taken by Delhi High Court and Gujarat High Court. 5.2 In that view of matter, issue is answered in favour of assessee. and on second issue decision of this Court in Commissioner of Income Tax vs. P.I. Industries Ltd., [2010] 321 ITR 601, while considering same it has been observed as under: assessee implemented Voluntary (4 of 4) [ITA-18/2016] Retirement Scheme Floated by it, which was duly approved by Commissioner under section 10(10C) and claimed deduction of entire expenses to tune of Rs.1,06,57,907 paid by way of terminal benefits, in relevant assessment year. Assessing Officer disallowed claim and held that it was not expenditure of nature described in sections 30 to 36 but it was in nature of capital expenditure. Held that even reading of sections 30 to 36 made it clear, tht expenditure claimed did not fall under any of those sections. It was not in dispute that amount was laid out or expended wholly and exclusively for purpose of business. Therefore, only question that survives was, as to whether expenditure could be said tobe capital nature. It was consistently established legal position that expenditure of nature as was involved in present case, was clearly allowable as revenue expenditure under section 37(1). Therefore, Tribunal was not in error in allowing entire claim of deduction under section 37(1) of amount paid by assessee towards dues of its employees whose services were brought to end under Voluntary Retirement Scheme. 5. Against decision, SLP is pending. Therefore, on second issue, subject to SLP issue is answered in favour of assessee. 6. Issue No.1 is also rightly decided by Tribunal in favour of assessee. 7. In that view of matter, both issues are answered in favour of assessee against department. 8. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/33 Pr. Commissioner of Income-tax, Alwar v. Gillette India Ltd