Depreciation allowable where the assets are used by any other person for manufacturing of goods on behalf of assessee
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Case Details:
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Gillette Diversified Operations Private Limited vs. DCIT
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Appeal No.:
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ITA No. 1161/Del/2018
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Order pronounced by:
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ITAT Delhi
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Date of Order:
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03-02-2021
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Assessment Year:
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2012-13
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Brief Facts:
- The assessee is a company engaged in the business of trading of wide range of products for personal care and use. It is engaged in distribution of Oral care products primarily falling under health care segment consisting of toothbrush, toothpaste, dental floss etc.
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- The plant and machinery owned by the assessee are located at factory of M/s Rialto Enterprises (P) Ltd. which is manufacturing the goods for the assessee. The assessee submitted that in case of termination of agreement, the assets and other properties belonging to the assessee will be immediately removed which is in the possession of M/s Rialto Enterprises (P) Ltd.
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- The Ld. A.O. disallowed the claim for depreciation and insurance expense related to above plant & machinery as not used allegedly for the business of the assessee.
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Submission by the assessee:
- Ld. AR submitted that this issue also came up for consideration in assessee’s own case for the A.Y. 2010-11 before co-ordinate bench of this Tribunal in ITA No. 5736/Del/2015 filed by the Revenue and the coordinate bench held in that the issue is squarely covered in favour of the assessee by the judgement of Hon’ble Supreme Court in the case of ICDS Ltd. v. CIT reported in 29 Taxmann.com 129 (SC) and Liquidators of Pursa Ltd. v. CIT 25 ITR 265 to come to the conclusion that “used for the purposes of business, profession or vocation” means used for the purpose of enabling the owner to carry on the business and earn profits in the business.
- The Tribunal accordingly, held that the assets given to the M/s Rialto Enterprises (P) Ltd. for producing goods for the business of the assessee are eligible for depreciation and dismissed the appeal of the department filed on this issue. Also, the Revenue accepted the same without filing any appeal against the order of Tribunal on this aspect before the Hon’ble High Court.
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Tribunal’s Ruling:
There is no denial of the fact that there is no change in facts and circumstances as well as law on this fact from the earlier assessment years and the facts and circumstances remain the same, rule of consistency demands that similar relief as has been allowed to the assessee in A.Y.2010-11 by the Tribunal has to be followed and relief has to be granted to the assessee.
Conclusion: The law requires that the assessee must use the asset for the purposes of business. It does not mandate that the asset should be used by the assessee itself. As long as the asset is utilised for the purpose of business of the assessee, the requirement of section 32 will stand justified and thus the claim for depreciation shall be allowed.
Read Complete Order: https://www.itat.gov.in/files/uploads/categoryImage/1613373771-1161%20-%201698-D-18%20-%20GILLETTE%20DIVERSIFIED.pdf
