Pr. Commissioner Of Income Tax, Alwar v. Gillette India Ltd., Spa-65A, Industrial Area, Bhiwadi

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 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, the appellant has challengedthe judgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal preferred by the department and hasconfirmed the order passed by the CIT(A). 2.This Court while admitting this appeal on 28.03.2017, framed following substantial questions of law: “1.Whether the Tribunal was legally justifiedin deleting the disallowance of Rs.53,91,089/-on account of depreciation on assets which werenot put to use in the year under consideration? 3.Whether the Tribunal was legally justifiedin deleting the disallowance of VRS payment ofRs.2,05,62,000/- specifically when the assesseeitself showed and claimed it as a deferredrevenue expenditure in the books of accountsbut in the return of income the entire amountwas claimed u/s 37(1)?” 3. Counsel for appellant has contended that both the authorities have wrongly deleted the disallowance of amount ofRs.53,91,089/- though property was not used by the assessee and even on the second issue the Tribunal has committed error inallowing the deleting disallowance of VRS payment ofRs.2,05,62,000/- in favour of respondent. 4.However, counsel for the respondent has relied uponthe following judgments in the case of D.B. Income Tax AppealNo.349/2011, The 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, theTribunal relying upon the decision of Delhi HighCourt in the case of CIT vs. Bharat AluminumCompany Ltd. 187 Taxman 111, 124(Del.) and inthe case of CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat High Court inthe case of CIT vs. Sonal Gum Industires 322ITR 542 in para 52 to 56 has held as under: Tribunal relying upon the decision of Delhi HighCourt in the case of CIT vs. Bharat AluminumCompany Ltd. 187 Taxman 111, 124(Del.) and inthe case of CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat High Court inthe case of CIT vs. Sonal Gum Industires 322ITR 542 in para 52 to 56 has held as under: under:- “5. In so far as issue No.(iii) is concerned, theTribunal relying upon the decision of Delhi HighCourt in the case of CIT vs. Bharat AluminumCompany Ltd. 187 Taxman 111, 124(Del.) and inthe case of CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat High Court inthe case of CIT vs. Sonal Gum Industires 322ITR 542 in para 52 to 56 has held as under: Tribunal relying upon the decision of Delhi HighCourt in the case of CIT vs. Bharat AluminumCompany Ltd. 187 Taxman 111, 124(Del.) and inthe case of CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat High Court inthe case of CIT vs. Sonal Gum Industires 322ITR 542 in para 52 to 56 has held as under: “52. We have heard the rival submission and consideredthem carefully. After considering the relevant material alongwith written submission and various case laws, we find thatthe assessee deserves to succeed. It is a fact on record thatM/s Duracell batteries India Limited amalgamated with theassessee company in A.Y. 2000-01. On amalgamation itsplant & Machinery was included in the block of the plant &Machinery of the assessee company. This block was used forthe purpose of the business in A.Y.2000-01 & 2001-02. InA.Y. 2002-03 the assessee did not fulfill the condition laiddown u/s 72A and therefore the unabsorbed losses anddepreciation of the amalgamating company M/s Duracellbatteries India Limited which was set off in A.Y. 2000-01and 2001-02 was withdrawn and offered in income in A.Y.2002-03. However the fact remain is that plant & Machineryof Duracell battery India Limited merged in the block ofassets of the assessee company on its amalgamation and onsuch block depreciation for A.Y. 2000-01 & 2001-02 wasallowed under the block concept of depreciation once anasset has formed part of the block it can’t be reducedexcept by monies payable in respect of any assets falling inthat block which is sold or discarded or demolished ordestroyed as per section 43(6) of the Income tax Act. TheMoney becomes payable in A.Y.2004-05 when such plant &Machinery were sold for Rs.29,98,65,810/- in A.Y. 2004-05and Rs.1,26,23,967/- in A.Y. 2005-06 when such amountwas reduced from the block of plant & machinery. Theexample given by Ld. AR in his written note amply illustratethe mechanism of allowance of depreciation u/s 32 after theblock concept of asset. Therefore, the notional disallowanceof depreciation in respect of plant & machinery of Duracellbatteries which formed part of the block of assets of the assessee is not permitted in law. 53. The Delhi High court of CIT V/s. Bharat AluminiumCompany Ltd. 187 Taxman 111, 124 (Del.) held that thoughas per section 32(1), in order to get entitled to claimdepreciation, asset is to be owned by the assessee and it isalso be used for the purpose of business and profession butthis expression when applied to block of assets and not anyspecific building, machinery, plant or furniture in said blockof assets as individual assets loose their identity afterbecoming inseparable part of block of assets. 54. TheGujarat High Court in case of CIT V/s. Sonal Gum Industries322 ITR 542 held that in relation to block of assets it is notpossible to segregate items falling with in the block for thepurpose of granting depreciation or restricting the claimthereof. Once it was found that the assets were used for theprupose of business, it was not necessary that all the itemsfalling within plant and machinery have to be simultaneouslyused for being entitled to depreciation. 55. The Delhi High Court in case of CIT V/s. Yamaha MotorsIndia Pvt. Ltd. 226 CTR 304 held that Expression “Used forthe purpose of business” in section 32 has to be readharmoniously with the expression “Discarded” occurring inClause III of sub section (1) thereof. On harmonious readingof these expressions, “Used for the purpose of business”only means that assessee has used the machinery for thepurpose of business in earlier years. Therefore oncedepreciation was allowed on block of assets in previous yearactual user of machinery is not required with respect to thediscarded machinery and the condition for eligibility ofdepreciation that machinery is used for the purpose ofbusiness would mean that discarded machine is used for thepurpose of business in the earlier years for whichdepreciation is allowed. 56. Mumbai ITAT in case of M/s.Swati synthetics Lts. V/s. ITO 2010 TIOI. 78 held thatdepreciation is allowable on the entire block even if some ofthe assets of the block have not been used. The use of theindividual asset for the purpose of business can beexamined only in the first year when the asset is purchased.In subsequent years use of block of assets is to beexamined. 6 Existence of individual assets in the block ofassets itself amounts to use for the purpose of business.” 5.1 In view of the decisions of two High Courtsand one decision of the Tribunal, the Tribunalhas not committed any error and we affirm theview taken by the Tribunal and also the viewtaken by the Delhi High Court and Gujarat HighCourt. 5.2 In that view of the matter, the issue isanswered in favour of the assessee.” and on the second issue the decision of this Court in theCommissioner of Income Tax vs. P.I. Industries Ltd., [2010] 321ITR 601, while considering the same it has been observed as under: “The assessee implemented a Voluntary Retirement Scheme Floated by it, which wasduly approved by the Commissioner undersection 10(10C) and claimed deduction of theentire expenses to the tune of Rs.1,06,57,907paid by way of terminal benefits, in the relevantassessment year. The Assessing Officerdisallowed the claim and held that it was not anexpenditure of the nature described in sections30 to 36 but it was in the nature of capitalexpenditure. Held that even a reading of sections 30 to 36made it clear, tht the expenditure claimed didnot fall under any of those sections. It was notin dispute that the amount was laid out orexpended wholly and exclusively for the purposeof business. Therefore, the only question thatsurvives was, as to whether the expenditurecould be said tobe a capital nature. It wasconsistently established legal position that theexpenditure of the nature as was involved in thepresent case, was clearly allowable as revenueexpenditure under section 37(1). Therefore, the Tribunal was not in error inallowing the entire claim of deduction undersection 37(1) of the amount paid by theassessee towards the dues of its employeeswhose services were brought to an end underthe Voluntary Retirement Scheme.” 5.Against the 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 the Tribunal in favour of assessee. 7.In that view of the matter, both the issues are answered in favour of assessee against the department. 8. The appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/33