Court allows depreciation on Tetrapack machine based on principle of readiness for use.

The court ruled in favor of the assessee, allowing the claimed depreciation on the Tetrapack machine. The decision was based on the principle that keeping the machine ready for use constituted its use, entitling the assessee to depreciation even if it was not actively utilized during the relevant year.

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Issues:
1. Entitlement to claim depreciation on a machine not put to use during the relevant year.
2. Requirement of actual use before claiming depreciation under section 32 of the Income-tax Act.

Analysis:

Issue 1: Entitlement to claim depreciation on a machine not put to use during the relevant year
The case involved an assessee engaged in the business of solvent extraction and soya milk production. The assessee declared nil income after claiming depreciation on a Tetrapack machine, which was found idle during a survey. The Assessing Officer withdrew the claimed depreciation. The Commissioner of Income-tax (Appeals) upheld the disallowance, but the Income-tax Appellate Tribunal allowed the depreciation, stating that as the machine was not sold, discarded, or demolished, the assessee was entitled to depreciation. The Tribunal's decision was challenged by the Revenue. The court examined section 32 of the Income-tax Act, emphasizing the requirement of actual use for claiming depreciation. However, the court held that keeping the machine ready for use constituted passive use, entitling the assessee to depreciation based on precedents and the principle that if an asset is not disposed of, the assessee can claim depreciation.

Issue 2: Requirement of actual use before claiming depreciation under section 32 of the Income-tax Act
The Revenue argued that the machine must be used for the business or profession to claim depreciation, as per section 32 of the Income-tax Act. The Revenue contended that the Tribunal's decision to grant depreciation despite the machine not being used was unsustainable. However, the respondent's counsel argued that as long as the machine was kept ready for use and not discarded, the assessee was entitled to depreciation. The court referred to various decisions supporting this view, emphasizing that if an asset was available for use and not disposed of, the assessee could claim depreciation. The court upheld the Tribunal's decision, stating that keeping the machine ready for use constituted its use within the meaning of section 32 of the Income-tax Act.

In conclusion, the court ruled in favor of the assessee, allowing the claimed depreciation on the Tetrapack machine. The decision was based on the principle that keeping the machine ready for use constituted its use, entitling the assessee to depreciation even if it was not actively utilized during the relevant year.

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