Machinery will still be under block of asset as it's acquired for business purpose and it's a depreciable asset.
Treatment on sale will be same as per block of assets. No seperate treatment.
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Extract from Calcutta High Court judgement
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“13. In the case before us there is no dispute that the assessee is the owner of the plant and machinery. The only dispute before us whether the assessee should be treated to have “used” the plant and machinery for the relevant assessment year notwithstanding its admission that the machines could not be operated as would appear from the report of its Director.
14. In our opinion, the word “used” appearing in section 32(1) of the Act should be given a reasonable meaning. By introducing the said provision, the Legislature wanted to give the benefit of depreciation of the plant and machinery purchased by the assessee and used for the purpose of business. The word “used” should be interpreted to mean a situation where the machineries which are required for implementing the nature of business the assessee runs, have been kept ready for use for the above purpose. In other words, if the assessee purchases a machine which is not required at all having regard to the nature of the business carried on by the assessee, he will not be entitled to the benefit of depreciation because the said machinery is not meant for the use in the business of the assessee.
15. On the other hand, an assessee-doing various manufacturing items may have purchased different machineries having regard to the diversity of the orders he gets or expects to get. In the process, a particular type of machinery may be required for finishing a particular type of a product. If in a given assessment year, the assessee did not get any order of manufacture of that particular item necessitating the use of that particular machinery, for that reason, he should not be deprived of the benefit of depreciation of that machinery although the same was ready for use whenever an order of manufacture of such item would come.
16. In the case before us, the assessee was ready for doing his business. But for the adverse law and order situation, he could not actually run the factory although all the machineries were ready for use and the valuation of such machinery also depreciated notwithstanding its non-user. Notwithstanding such adverse law and order situation, the assessee did not abandon its business but suffered loss for such a state of affairs prevailing in that State over which he had no control with an expectation of resuming the business. This is not a case where the assessee himself is embroiled in a dispute with his labourers and in the process, has decided to declare a lockout expressing its intention not to run the business.
Thus, taking into consideration the circumstances of the present case, we are of the view that the Tribunal below rightly granted depreciation in favour of the assessee.”
CAclubindia
