2000 (8) TMI 22 - HC - Income Tax

High Court Upholds Tribunal Decision on Depreciation Claim for Fabric Division

The High Court affirmed the Tribunal's decision allowing the assessee's claim for depreciation on plant and machinery of the fabric division, emphasizing ... Depreciation Issues Involved:1. Depreciation on plant and machinery of fabric division.2. Commencement of trial run and training of employees.Summary:Issue 1: Depreciation on Plant and Machinery of Fabric DivisionThe primary question was whether the Appellate Tribunal was correct in allowing the assessee's claim for depreciation amounting to Rs. 1,11,96,701 on the plant and machinery of the fabric division. The Tribunal concluded that the machines were installed and used for trial production during the relevant accounting year, thus justifying the depreciation claim. The Tribunal's decision was based on the interpretation of 'used for the purpose of business' under section 32(1) of the Income-tax Act, which includes both active and passive use. The court upheld the Tribunal's decision, citing various precedents that support the broader interpretation of 'use,' including trial production as sufficient for claiming depreciation.Issue 2: Commencement of Trial Run and Training of EmployeesThe second issue was whether the Tribunal erred in not observing that the trial run and training of employees by foreign technicians commenced only after the close of the previous year. The Tribunal found that the trial production started on March 26, 1993, and some cotton fabrics were produced and shown as closing stock. The court noted that the Revenue did not raise the issue of the legal effect of capitalizing expenses before the Tribunal, and thus it could not be considered a substantial question of law. The court emphasized that the Tribunal's finding was based on evidence and that the plant and machinery were indeed used for business purposes during the relevant period.Conclusion:The High Court dismissed the appeal, affirming the Tribunal's decision that the assessee was entitled to depreciation as the plant and machinery were used for trial production within the accounting year. The court held that no substantial question of law arose from the Tribunal's findings, which were based on the material placed on record.