TaxTMI 
TaxTMI 
2013 (8) TMI 525
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....r for the purpose of business prescribed under Section 32 of the Act has not been fulfilled? 2. The assessee claimed depreciation on Gas Sweetening Plant in the previous year relevant to the assessment year 1998-99. The claim was, however, rejected by the Assessing Officer on the ground that the plant was not used at any time for the purposes of the business, as required under Section 32(1) of the Income Tax Act,1961. The plant was built during the previous year relevant to the Assessment Year 1997-98, but on account of non-availability of raw material viz., sour gas, the same was not put to use. The plant was commissioned by running a test run for the first time during the previous year relevant to the assessment year 1997-98. Considering the trial run as equivalent to putting the said plant to use, depreciation was allowed for the assessment year 1997-98 by the Department. However, on the ground that the assessee had not disclosed the material fact that plant was not in use during the whole of the previous year relevant to the assessment year 1998-99, the assessment was reopened by issue of notice under Section 148 of the Income Tax Act, 1961. 3. The assessee contended that....
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....hinery, even though was not working on account of non-availability of raw material, yet, in view of its readiness to function, the relief should have been granted, the assessee placed reliance on the decision in the case of CIT Vs. Heera Financial Services Ltd., reported in 212 CTR 532, in the case of CIT Vs. Swarup Vegetable Products India Ltd., reported in 277 ITR 60 (Allahabad) in the case of CIT Vs. Nahar Exports Ltd., reported in 296 ITR 419 and in the case of CIT Vs. Southern Petrochemicals Industries Corporation Ltd reported in 292 ITR 632. 8. The claim of the assessee was, however, contested by the Revenue pointing out that the decision of this Court in the case of CIT Vs. Heera Financial Services Ltd reported in 212 CTR 532 was distinguishable, since it related to the case of leasing out of certain films and the same could not be used by the lessee. On the other hand, the Revenue placed reliance on the decision of the Karnataka High Court in the case of DCIT Vs. Yellamma Dasappa Hospital reported in 290 ITR 353 and contended that unless the machinery have been actually put to use, the requirements of law thus not satisfied, the claim was to be rejected. 9. Referring ....
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....laim of the assessee could not be granted. In this connection, learned Judicial Member referred to the decision of the Bombay High Court in the case of Dineshkumar Gulabchand Agarwal Vs CIT reported in 267 ITR 768 holding that the word 'used' meant 'actually used' and not merely 'ready for use'. Learned Judicial Member pointed out that in the case of CIT Vs. Maps Tours and Travels reported in (2003) 260 ITR 655, cars bought on the last day of the accounting year were not registered for being brought on road, and there was no evidence of having used those cars before the end of the accounting year in the business of the assessee. Thus, this Court held that the assessee was not entitled to depreciation in respect of those vehicles. Learned Judicial Member further referred to the decisions in the case of B.Malini and Co. Vs. CIT reported in (1995) 214 ITR 192 (Bombay), in the case of DCIT Vs. Yellamma Dasappa Hospital reported in 290 ITR 353 and in the case of DCIT Vs. N.K.Industries Ltd., reported in 305 ITR 274 (SC) and held that even under the amended provision, the assessee was entitled to the claim for depreciation, only if the assets were, in fact, used for business purposes. Th....
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....d in its favour. Thus, the Third Member-Vice President agreed with the Accountant Member and granted the relief. Aggrieved by this, Revenue has preferred this Tax Case Appeal. 15. Section 32 of the Income Tax Act, as is relevant for consideration, reads as under:- " Section 32. Depreciation-(1) In respect of depreciation of - (i) buildings, machinery, plant or furniture being tangibel assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed- (i)in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed, (ii)in the case of any block of assets, such percentage on the written down value thereof as may be prescribed." 16. The Supreme Court had an occasion to consider the phrase 'use for the purpose of business' in the case of Liquidators of Pursa Ltd Vs....
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....ceeds the amount for which the machinery or plant is actually sold or its scrap value : Provided that such amount is actually written off in the books of the assessee : Provided further that where the amount for which any such machinery or plant is sold exceeds the written down value, the excess shall be deemed to be profits of the previous year in which the sale took place .................. " The Apex Court pointed out that the critical words which are essentially constituent for the purpose of considering the claim of the assessee was machinery or plant "used for the purposes of business, profession or vocation" . The words "used for the purposes of business" obviously means used for the purpose of enabling the owner to carry on the business and earn profits in the business. In other words, the machinery or plant must be used for the purpose of that business which is actually carried on and the profits of which are assessable under Section 10(1). It pointed out that the sale of the machinery and plant was not an operation in furtherance of the business carried on by the company but was a realisation of the assets in the process of gradual winding up of its business, ....