Tribunal overturns disallowance of depreciation and business loss claim, finds manufacturing activity commenced.

The Tribunal allowed the appeal, overturning the disallowance of depreciation and business loss claimed by the appellant. The decision was based on evidence demonstrating the completion of construction, machinery installation, and trial production, indicating the readiness of the business setup. The appellant's documentation, including payments to contractors, generator usage, and sales records, supported the Tribunal's finding that the manufacturing activity had commenced.

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Issues:
1. Disallowance of depreciation claimed by the appellant.
2. Disallowance of business loss suffered by the appellant.

Issue 1: Disallowance of Depreciation
The appeal was filed against the order of the Ld. CIT (A) confirming the disallowance of depreciation claimed by the appellant. The Assessing Officer (AO) rejected the claim stating that the manufacturing activity had not commenced. The AO listed various reasons for disallowing the claim, including the absence of production records, wages register, electricity connection, and evidence of machinery installation. The First Appellate Authority also upheld the disallowance, emphasizing the lack of evidence supporting the readiness of machinery for use. The appellant argued that construction of the factory and machinery installation were completed, supported by various documents. The appellant also presented excise duty and VAT-related evidence. The Tribunal observed that the Revenue did not dispute the sale of goods by the appellant on a specific date. It noted that the appellant had provided evidence of payments to contractors, generator usage, and trial production. The Tribunal concluded that the business was set up, machinery was ready for use, and trial runs had been conducted, leading to the allowance of depreciation.

Issue 2: Disallowance of Business Loss
The second ground of appeal related to the disallowance of business loss suffered by the appellant. The AO and the First Appellate Authority disallowed the business loss claim due to the alleged non-commencement of manufacturing activity. The appellant contended that the machinery was ready for use, supported by evidence of construction completion and machinery installation. The appellant also highlighted excise duty and VAT records to substantiate sales. The Tribunal noted the appellant's production of evidence regarding construction, generator usage, and trial production. It found that the appellant had successfully demonstrated the readiness of the business, machinery, and trial production. Consequently, the disallowance of business loss was deemed erroneous, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal allowed the appeal of the appellant, overturning the disallowance of depreciation and business loss. The decision was based on the establishment of the business setup, readiness of machinery, and conduct of trial production by the appellant, as evidenced through various documents and records.

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