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of <h1>Court rules in favor of Dalmia Cement Ltd. on depreciation allowance interpretation.</h1> <h3>COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA Versus DALMIA CEMENT LTD.</h3> COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA Versus DALMIA CEMENT LTD. - [1945] 13 ITR 415 (Pat) Issues:Interpretation of Section 10(2)(vi) of the Income-tax Act regarding depreciation allowance entitlement based on the actual period of usage of machinery by the assessee.Analysis:The case involved a dispute between the assessee, Dalmia Cement Ltd., and the Income-tax department regarding the entitlement to claim the full depreciation allowance under Section 10(2)(vi) of the Income-tax Act. The contention was whether the full amount allowable should be deducted or only a proportionate amount based on the period during which the factory was operational. The Tribunal sided with the assessee, leading to a reference to the High Court by the Commissioner of Income-tax dissatisfied with the Tribunal's decision.The interpretation of sub-clause (vi) of Section 10(2) was crucial, especially in conjunction with sub-clause (iv), which indicates that the depreciation allowance applies to buildings, machinery, etc., used for business purposes. The court referred to a previous case to explain that 'used' denotes actual usage, not just capability. The judgment highlighted that machinery kept ready for use, even if not actively used, could still be considered 'used' for business purposes, justifying depreciation allowance.The Income-tax department relied on Section 10(3) to argue for a proportionate allowance based on the actual period of usage. However, the court clarified that this provision applies when the asset is not wholly used for business purposes, not when it is not used throughout the year. The judgment emphasized that the law does not support calculating depreciation based on the period of actual usage if the machinery was not exclusively used for other purposes. The court rejected the department's argument for a proportionate allowance based on actual usage, stating that such an interpretation was not supported by the applicable law.In conclusion, the High Court answered the question in the affirmative, affirming the Tribunal's decision to allow the full deduction claimed by the assessee. The court awarded costs to the assessee and concluded that the provision did not support a proportionate allowance based on the actual period of usage. Justice Manohar Lall agreed with the decision, and the reference was answered in favor of the assessee.
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