Tribunal: Depreciation Requires Actual Use, But Obsolete Stock Write-Off Allowed Due to Obsolescence and Strike.

The Appellate Tribunal partly allowed the Revenue's appeal by upholding the disallowance of depreciation on plant and machinery not actually used during the relevant year, emphasizing the necessity of actual use for depreciation eligibility. However, it rejected the Revenue's appeal concerning the deletion of the addition of obsolete stock written off, affirming the Commissioner's decision to allow the full claim due to the recognized obsolescence and the strike/lockout situation. The Tribunal found the Revenue's partial disallowance of the obsolete stock unjustified.

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Issues:
1. Disallowance of depreciation on plant and machinery not put to use during the relevant previous year.
2. Deletion of addition of 50% of obsolete stock written off.

Analysis:

Issue 1: Disallowance of Depreciation on Plant and Machinery
The Revenue contended that depreciation should only be allowed on actual use of machinery, not on passive use during a lockout period. The Commissioner of Income-tax (Appeals) had allowed depreciation, considering the temporary disruption in manufacturing activities due to strikes and lockouts as passive use. The Appellate Tribunal noted that the Bombay High Court's decision in Dineshkumar Gulabchand Agrawal v. CIT clarified that depreciation cannot be allowed on assets ready for use but not actually used. The Tribunal held that the assessee was not entitled to depreciation on passive use or machinery ready for use, emphasizing the need for actual use for depreciation eligibility. Additionally, the Calcutta High Court's decision in CIT v. Oriental Coal Co. Ltd. supported the same principle, stating that depreciation is not allowable if machinery remains unused during a lockout period.

Issue 2: Deletion of Addition of Obsolete Stock Written Off
The Assessing Officer had made a 50% disallowance on the written-off stock due to obsolescence, which was allowed by the Commissioner of Income-tax (Appeals). The Tribunal found that the Assessing Officer had accepted the fact of obsolescence by allowing 50% of the claim. As the justification for writing off the stock was the strike/lockout situation, the Tribunal upheld the Commissioner's decision to allow the entire claim, as there was no reason to only allow half of it. The Revenue's argument for partial disallowance was deemed unjustified, and the Tribunal rejected the Revenue's appeal on this ground.

In conclusion, the Appellate Tribunal partly allowed the Revenue's appeal concerning the disallowance of depreciation on plant and machinery but rejected the appeal regarding the deletion of the addition of obsolete stock written off.

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