2015 (5) TMI 116 - HC - Income Tax

Court upholds depreciation claim for machine installation pre-year-end; readiness for use sufficient.

The High Court dismissed the appeal filed by the revenue and ruled in favor of the respondent assessee. The Court found that the Tribunal's conclusions ... Depreciation and investment allowance - Tribunal allowed that any amount of depreciation and investment allowance could be deducted - whether there was no material to show that the machine was used for production and manufacturing? - Held that:- On a reading of the evidence before it, if the Tribunal has come to the conclusion that the machine having been installed before the end of the financial year and used for trial in terms of the certificate of factory manager, we are of the view that it is a plausible view that the machine having been used for the purpose of business cannot be interfered with. Moreover such an aspect is pure question of fact. We do not think, it would be appropriate for this Court to interfere with such a finding when the conclusion as drawn by the Tribunal is not perverse or such which cannot be drawn by any reasonable person or authority on disclosed state of facts. The power of the High Court to interfere with the factual findings of the Tribunal is well settled. See Ishwar Dass Jain Vs. Sohan Lal [1999 (11) TMI 863 - SUPREME COURT]. Thus it is not a case, when material or relevant evidence was not considered. That apart, it is also not the case of the appellant-revenue that the finding of fact has been arrived at by the Tribunal, relying upon the inadmissible evidence. The off shoot of the above discussion is that machine has been duly installed and was in a working condition before the end of the previous year. - Decided in favour of assessee. Issues:1. Whether the finding recorded by the Tribunal is perverseRs.2. Whether in the absence of any evidence to the effect that the machine was put to use before the closure of the financial year and in the absence of documentary evidence in this behalf, the Tribunal was justified in arriving at a conclusion that any amount of depreciation and investment allowance could be deductedRs.Analysis:Issue 1:The case involved an appeal under Section 260A of the Income Tax Act, 1961 filed by the revenue challenging the order of the Income Tax Appellate Tribunal (Tribunal). The substantial question of law was whether the finding recorded by the Tribunal was perverse. The Assessing Officer disallowed depreciation on a machine, stating it was not installed before the close of the Accounting Year. The Commissioner of Income Tax (Appeals) dismissed the appeal by observing the lack of evidence regarding the machine's use. However, the Tribunal held that the machine was installed before the end of the financial year based on the material presented. The High Court noted that the Tribunal's conclusion was plausible, not perverse, and interference was not warranted as it was a question of fact.Issue 2:The second issue revolved around the absence of evidence regarding the machine's use before the closure of the financial year. The appellant-revenue argued that the machine should have been actually used in a commercial sense for depreciation claims. However, the respondent assessee contended that the machine was handed over for a trial run before the end of the previous year, indicating readiness for use. The High Court analyzed Section 32 of the Act, emphasizing ownership and use of the asset for depreciation purposes. Referring to precedents, the Court highlighted that readiness for use suffices for depreciation claims. The Tribunal's finding that the machine was installed and used for trial was upheld, rejecting the revenue's argument of non-production for commercial use.In conclusion, the High Court dismissed the appeal, ruling in favor of the respondent assessee, as the Tribunal's findings were deemed reasonable and factual, with no grounds for interference. The judgment emphasized the interpretation of 'use' for depreciation purposes and upheld the readiness of the machine for business use as sufficient grounds for depreciation claims.