Tribunal allows depreciation on diagnostic machines, supporting business strategy.

The Tribunal allowed the appeal, overturning the disallowance of depreciation on diagnostic machines installed at customers' sites. It held that the machines formed part of the assessee's business strategy to enhance reagent sales, meeting the conditions under Sec. 32(1) of the Income-tax Act. The Tribunal disagreed with the CIT(A)'s decision and allowed depreciation, citing evidence of the machines' inclusion in the assessee's block of assets. This decision aligned with the Tribunal's previous rulings on similar cases, emphasizing the strategic business approach adopted by the assessee.

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Issues involved:
1. Disallowance of depreciation on plant and machinery installed at customers' premises.
2. Claim of depreciation under Sec. 32(1) of the Income-tax Act, 1961.
3. Interpretation of whether diagnostic machines installed at customers' sites form part of the assessee's block of assets.

Detailed Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of depreciation on plant and machinery installed at customers' premises. The Assessing Officer (A.O) disallowed the depreciation claimed by the assessee as the machines were being used by third parties for their business, not the assessee's business. The A.O found that the machines were not being used for the purpose of the assessee's business as required under Sec. 32(1) of the Act, leading to the disallowance of depreciation amounting to Rs. 7,69,333. The CIT(A) dismissed the appeal, citing similar issues in previous years. The Tribunal, in a previous order, allowed depreciation on similar diagnostic machines installed at customers' sites, emphasizing the strategic business approach adopted by the assessee to boost sales of reagents.

2. The Tribunal analyzed the nature of the assessee's business and the strategic deployment of diagnostic machines at customers' sites under agreements requiring exclusive purchase of reagents from the assessee. The Tribunal found that the machines were part of the assessee's business strategy to enhance reagent sales, satisfying the conditions under Sec. 32(1) of the Act. The Tribunal disagreed with the CIT(A)'s view that the machines did not form part of the assessee's block of assets, highlighting the evidence provided by the assessee regarding the machines' inclusion in the block of assets. The Tribunal set aside the CIT(A)'s order and allowed the appeal, stating that the assessee was entitled to depreciation on the diagnostic machines installed at customers' sites.

3. The Tribunal concluded that the issue in the current case was similar to the one in previous years where the Tribunal had allowed depreciation on diagnostic machines installed at customers' sites. The Tribunal, following its previous order, set aside the CIT(A)'s decision to uphold the disallowance of depreciation by the A.O. The Tribunal allowed the appeal, stating that the assessee met the conditions under Sec. 32(1) of the Act and was entitled to depreciation on the diagnostic machines. The appeal was allowed based on the Tribunal's previous order and the evidence presented by the assessee regarding the machines' inclusion in its block of assets.

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