Actual user required for depreciation, and reference of a legal question needs strict statutory compliance.

Depreciation on machinery is allowable only when the plant or machinery is actually used in business during the accounting year; mere readiness for use does not meet the statutory requirement, so the claim was rejected. A question of law could also not be referred under the reference provision without a valid and timely application complying with the prescribed procedural requirements, so the additional question was not entertained. The material points emphasise actual user as the basis for depreciation and strict compliance with the statutory procedure for reference of legal questions.

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Issues: (i) whether the assessee could claim depreciation on machinery that was kept ready for use but not actually used during the accounting year; and (ii) whether the second question of law could be referred to the High Court without a separate application under section 66(1) of the Income-tax Act, 1922.

Issue (i): whether the assessee could claim depreciation on machinery that was kept ready for use but not actually used during the accounting year.

Analysis: Depreciation under section 10(2)(vi) is allowable as a consequence of business use of the machinery. The allowance is attracted only where the plant or machinery has been used, in whatever sense that expression may bear, at least for part of the accounting year. Mere readiness for use, without actual employment in earning income, does not satisfy the statutory requirement.

Conclusion: The claim for depreciation was not allowable and the finding was against the assessee.

Issue (ii): whether the second question of law could be referred to the High Court without a separate application under section 66(1) of the Income-tax Act, 1922.

Analysis: A reference under section 66(1) required a proper application within limitation, supported by the prescribed deposit and stating the question sought to be referred. The assessee had not made an application for reference of the second question, and the procedural requirements could not be dispensed with in its favour.

Conclusion: The second question was not referable and was declined to be answered.

Final Conclusion: The reference was answered against the assessee on the depreciation issue, and the additional question was not entertained for want of a valid application under the reference provision.

Ratio Decidendi: Depreciation under section 10(2)(vi) is available only when the machinery is actually used in the business during the accounting year, and a question of law cannot be referred under section 66(1) without a valid application complying with the statutory requirements.

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