Madhya Pradesh High Court
Cit vs Premier Industries (India) Ltd. on 19 September, 2007
Author: A.K. Shrivastava
Bench: A.K. Shrivastava
ORDER S.K. Kulshrestha, J.
1. Since common question have been formulated in the above two appeals, which are similar except for the assessment year, both these appeals are being decided by this common order.
2. The questions of law formulated in IT Appeal No. 65 of 2003 are as follows:
(1) Whether the Tribunal was justified in holding that the assessee was entitled to claim depreciation on the machine-Tetrapack and claimed deduction amounting to Rs. 28,87,651 when even, according to the assessee the said machine was not put to use during the relevant year in question ?
(2) It is obligatory upon the assessee to actually use or put the machinery into use before claiming depreciation under Section 32 of the Income Tax Act or mere purchase of a depreciable item in a particular assessment year entitles the assessee to claim depreciation in the relevant assessment year ?
3. The assessee is engaged in the business of solvent extraction and de- oiled cake simultaneously with the production and sale of Soya-milk, The assessee, in its return, declared its income nil, after claiming depreciation on the Tetrapack machine. However, during the course of survey under Section 133A, it was noticed that Tetrapack machine was lying idle covered with a paper and kept in a locked room. The assessing officer, therefore, withdrew the depreciation claimed on Tetrapack machine amounting to Rs. 28,87,651.
4. Aggrieved by the order of the assessing officer, the assessee preferred an appeal to Commissioner (Appeals). The appellate authority upheld disallowance of depreciation on the Tetrapack machine. However, on second appeal being filed to the Tribunal, the Tribunal accepted the claim of the assessee and, being of the view that the Tetrapack machine was neither sold nor discarded nor demolished, allowed the depreciation disallowed by the assessing officer and the Commissioner (Appeals). It is against, this order of the Tribunal that the revenue has filed this appeal on the questions reproduced hereinabove which are common to both appeals.
5. Learned senior counsel for the revenue brought to our notice the provision contained in Section 32 of the Income Tax Act, 1961 to buttress his argument, that unless the machine, on which depreciation can be claimed, has been used, the assessee does not become entitle to depreciation. Sections. 32(1)(i) and (ii) of the Income Tax Act, 1961 reads as extracted below:
32. (1) In respect of depreciation of -
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of 1-4-1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed.
6. Learned Counsel for the revenue , therefore, has highlighted that the expression used for the purposes of business or profession should be given its natural meaning and artificiality introduced by the Tribunal in granting depreciation notwithstanding that the Tetrapack machine was not used, is not sustainable.
7. Mr. G.M. Chaphekar, learned senior counsel for the respondent, per contra, has submitted that once machine has been brought for a particular purpose connected with the activities of the assessee and the same has not been discarded and is kept ready for use, the assessee becomes entitled to depreciation in accordance with the provisions of the Act. In support of this submission, learned senior counsel has brought to our notice a decision of the Tribunal in Speed Automobiles (P) Ltd. v. Assistant Commissioner (2004) 32 ITC 531 as upheld by a Division Bench of this Court in CIT v. Speed Automobiles (P) Ltd. (2004) 32 JTC 537. Reference has also been made to the decision of the Kerala High Court in CIT v. Geo Tech Construction Corporation (2000) 244 ITR 452 (Ker) which also takes the view that when the machine is kept ready for use, the assessee is entitled to depreciation on the principle of passive user. Similar view of the Delhi High Court in CIT v. Refrigeration & Allied Industries Ltd. (2001) 247 ITR 12 (Del) has been pressed into service.
8. The impugned order of the Tribunal has taken the view that if the asset is not sold, discarded or demolished or destroyed during the previous year, the assessee becomes entitled to depreciation. In this view of the matter, the Tribunal has allowed the depreciation on the Tetrapack machine of the assessee. Since keeping the machine in readiness is a finding of fact, we have to proceed on the assumption that the Tetrapack machine of the assessee was kept in readiness for use. In these circumstances, it would be deemed to have been used within the meaning of expression contained in Section 32 ibid.
9. The questions of law hereinabove stated are thus, answered against the revenue and in favour of the assessee. There shall be no order as to costs of this appeal. A signed copy of this order be retained in each appeal.