Use for business: contractual readiness qualifies as 'use', permitting depreciation under Section 10(2)(vi) for profit-generating plant.

The note clarifies that for depreciation under Section 10(2)(vi) an asset need not be actively operated to be "used for the purposes of the business"; machinery maintained ready for immediate use under an express contractual obligation constitutes use. The governing test is causal: whether, absent that asserted user (the upkeep and availability covenant), the profits taxed could have been earned. Where a contract secures a right to share in pooled profits and obliges the owner to keep plant in working order, that readiness is treated as use and permits the statutory depreciation allowance.

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Issues: Whether machinery kept ready for use under an express contractual obligation, but not actually operated during the assessment year, was "used for the purposes of the business" so as to entitle the assessee to an allowance for depreciation under Section 10(2) of the Income-tax Act.

Analysis: The statutory allowance for depreciation under Section 10(2)(vi) is linked to machinery being property of the assessee and used for the purposes of the business; reference to Section 10(2)(iv) (insurance) indicates that "used" contemplates machinery employed in the business. "Used" may be given a wider meaning than mere active operation and can include passive user where machinery is maintained ready for immediate use under an express contractual covenant. The decisive test is whether, without the asserted user (here the obligation to keep machinery in working order and available), the profits taxed could have been earned. Where a contract obliges the owner to keep plant in working order and thereby secures the right to share in pooled profits, the machinery's keeping in readiness constitutes use for the business from which the profits arise.

Conclusion: The machinery kept ready for use under the contractual obligation is to be regarded as "used for the purposes of the business" and the assessee is entitled to the depreciation allowance under Section 10(2)(vi) of the Income-tax Act.

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