Depreciation for passive use of plant and machinery is allowed when the business remains ready for revival.

Depreciation under section 32 is allowable where plant and machinery are kept ready for use in a business that remains alive, even if there is no actual operation during the year. On the facts, the business was found to be in a temporary lull rather than permanent closure, as the establishment was maintained, staff were paid, new plant and machinery were acquired, and repairs were incurred on existing machinery. In that setting, the assets were treated as passively used, and actual physical use was not indispensable for depreciation. The earlier accepted principle was applied to the facts found, which were not shown to be perverse.

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Issues: Whether depreciation under section 32 of the Income-tax Act, 1961 is allowable when plant and machinery are not actually operated during the year but are kept ready for use in a business that is not closed and is being maintained with a real prospect of revival.

Analysis: The assessee's case was found on facts to be one of temporary lull rather than permanent closure. The Tribunal recorded that the business was kept alive by maintaining the establishment, paying staff, acquiring new plant and machinery, and incurring repairs on existing machinery. The Court held that, in such circumstances, the assets could be regarded as kept ready for use, and actual physical use was not indispensable for depreciation. The Court also noted that the principle had already been accepted in earlier decisions and that the Tribunal had correctly applied that ratio to the facts found, none of which were shown to be perverse.

Conclusion: Depreciation was correctly allowed on the basis of passive use, and the Revenue's challenge failed.

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