TaxTMI 
TaxTMI 
2017 (2) TMI 167
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....uring activity stopped, due to, as stated, adverse market conditions and inefficient administration of the company. However, during the relevant previous years, being the financial years 2006-07 and 2007-08, the assessee claims to have undertaken job-work in respect of hermetically sealed refrigerator compressors for its' sister concern, M/s. Applicomp India Ltd., claiming that it (its' Management) had set things right from f.y. 2003-04 onwards, also undertaking trading activity in the goods being manufactured earlier (refer orders by the Revenue authorities and 'Statement of Facts' by the assessee). The Revenue, however, disallowed depreciation on plant and machinery and electric installation, and which constitutes the principal issue in these appeals. Proper details with regard to the plant and machinery used for job work, which it suspects to be a make-believe, i.e., with a view to bolster the claim for depreciation allowance, had not been furnished at any stage. The assessee meets this by stating that it had incurred expenses on power, fuel and water for the purpose, which in fact stand allowed in assessment for AY 2008- 09, for which year the disallowance of depreciation stand....
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....ses 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: Provided that no deduction ...........' User is thus one of the two preconditions or prerequisites - the other being ownership (of the capital asset), for the claim of the depreciation allowance u/s. 32(1) of the Act. The word employed in the provision is 'used', as emphasized by the Hon'ble jurisdictional High Court in Dineshkumar Gulabchand Agrawal vs. CIT [2004] 267 ITR 768 (Bom) (SLP against which stands dismissed by the Apex Court, reported at ([2004] 266 ITR (St.) 106), so that an asset, to be eligible for the claim of depreciation in its respect, is to be actually us....
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.... was under such like circumstances, signifying passive user, as against an active one, that the Hon'ble Court found the same as satisfying the test of 'user' and, thus, liable to be regarded as 'used' in terms of section 32(1). Can, for example, a plant or machinery, which could not be used for want of (say) feedstock or energy, be regarded as 'used', so as to be eligible for depreciation. The answer, to our mind, would depend on whether the same is functional as also if it stands put to use earlier. Surely, where so, temporary non-user will not disqualify the same as the same could only be regarded as available for use and, accordingly, a case of a passive user. Where, however, the machinery has not been put to use at any time earlier, and is to be put to use for the assessee's business for the first time, it cannot be regarded as an asset in passive use. Then, again, what may also be relevant is if the same is liable to be used in future. If (say), the user is proscribed in-as-much as the manufacturing process requires a raw material which is banned, so that the machinery cannot be under normal circumstances restored to production, there is no question of it being regarded as a p....
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.... details, and so are therefore the orders by the authorities below. Why, it is doubtful if the plant and machinery, rusted for years, could be made operational by expending meager sums on repairs. That apart, there may be significant technological changes over time, which may render the operations unfeasible, both qualitatively and quantitatively. The claim would require being examined, with the onus to establish its claim, proving it, being on the assessee. The job-work would need to be profiled in terms of its processes, specifying the machinery required and used for carrying out the same, i.e., the different processes. A flowchart, as submitted by the ld. AR, giving description of the process, wherever required, may be facilitative, coupling it preferably with the different factors of production, viz. labour, power, fuel and water, which the different processes involve or entail, so as to enable proper comprehension. It needs to be appreciated that the user is a matter of fact, and that the assessee's claim for depreciation allowance hinges critically on the same being established. 3.3 Continuing further, we are conscious that the scope of manufacturing activity is more exten....
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....utside the scope of these appeals, reference may be drawn, inter alia, to the decisions in Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC) and Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom) (FB). 3.4 The assessment for both the years is accordingly set aside qua the issue of claim for the impugned depreciation, and the matter restored to the file of the Assessing Officer (AO) for adjudication by issuing definite findings of fact upon due verification, based of-course on the material on/taken on record, giving proper opportunity to establish its' claims to the assessee. 4. The second issue is in relation to the disallowance of repairs incurred, claimed at Rs. 6.16 lacs and Rs. 2.51 lacs for the two consecutive years respectively. The same stand disallowed and, further, deleted and confirmed in first appeal, for the same reasons as have guided the disallowance of depreciation allowance for the relevant years. Clearly, the same cannot be disallowed merely because the assessee is also undertaking trading operations, i.e., apart from job-work. In fact, in a given case, the repair work could be independent of the job-work also. The assessee, on its part, has also ....