Business use for depreciation can exist through contract manufacturers and dealer-installed equipment used to protect products.

Depreciation under section 32 requires ownership and use of the asset for the assessee's business, and that test was satisfied on the stated facts. Plant and machinery supplied to a contract manufacturer remained the assessee's property, while manufacture and packing were controlled by the assessee; the machinery was therefore treated as used in the assessee's business even though operated by another party. Visi refrigerators installed at dealer outlets to preserve perishable products were also held to be business-use assets, as nothing showed they were outside the business purpose. Depreciation was thus allowable on both categories of assets.

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Issues: Whether the assessee was entitled to depreciation under section 32 on plant and machinery installed with a contract manufacturer and on visi refrigerators installed at dealer outlets, on the footing that the assets were used for the assessee's business.

Analysis: The depreciation allowance under section 32 requires ownership and user of the asset for the purpose of the assessee's business. The arrangement with the contract manufacturer showed that the machinery was supplied by the assessee for manufacture of its own products, the manufacture and packing were controlled by the assessee, the machinery remained the assessee's property, and the manufacturer had no independent right over the equipment. On these facts, the machinery was treated as having been used for the assessee's business even though the physical operation was through another party. The visi refrigerators were installed at dealer premises to preserve the assessee's products, which were perishable and required temperature control, and nothing was shown to indicate that they were not used in the business.

Conclusion: The assessee was entitled to depreciation on both the plant and machinery and the visi refrigerators.

Ratio Decidendi: Assets owned by an assessee are eligible for depreciation when they are put to business use through a contractual or operational arrangement that enables the assessee to carry on and protect its business, even if physical use is through another person or at third-party premises.

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