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The present appeal has been preferred by the assessee against the order dated 12.12.2011 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.

2. The assessee through its grounds of appeal has agitated the confirmation of disallowance of depreciation of Rs.15,31,320/- on the imported machinery as well as disallowance of interest of Rs.12,87,243/- on the loans taken for the purchase of the above machinery.

The facts of the case are that during the year the assessee imported and purchased machinery worth Rs.80 lacs which was an automatic toothbrush M/s. Taan Products finishing machine and claimed depreciation thereon amounting to Rs.15,31,230/-. During the course of assessment proceedings the Assessing Officer (hereinafter referred to as the AO) asked the assessee to furnish the installation certificate of the machinery and the evidence of use of the machinery in the assessee's business. Before the AO, it was explained by the assessee that the assessee had been manufacturing toothbrush on behalf of Gillette Company. It was also explained before the AO that the assessee did not have his own work force and the activities of bristling and packing were done on labour work basis. The material was transferred to M/s. K P. Plastics for conversion into bristles and then to M/s. S.P. Plastic for moulding of handles. It was noted by the AO that no manufacturing activity was being done by the assessee even earlier and after purchase of the raw material, as it was getting the products manufactured from its sister concerns i.e. M/s. K.P. Plastics, M/s. S.P. Plastics and M/s. Goodwill Packaging, on job work basis. So when the assessee was not having any basic machinery for the manufacturing process, then there would not be any necessity of a sophisticated machinery which was required only for finishing of products and not for the basic manufacturing of the product. The AO supported his conclusion from the fact that there was no work force employed by the assessee for his own manufacturing activity and all the production as per the clients requirements was being got done from the sister concerns on job work basis. Moreover, no installation certificate of the machinery was provided to the AO. There was decrease in turnover from 2.19 crores to 1. 48 crores which further suggested that the new machinery was not utilized. Under these circumstances, the AO came to the conclusion that the machinery had not been used in the business activity of the assessee and hence he disallowed the depreciation of Rs.15,31,230/- claimed on such machine and disallowed the interest of Rs.12,87,243/- on the loans taken for the purchase of the above M/s. Taan Products machinery. Aggrieved by the above additions, the assessee has preferred appeal before the Ld. CIT(A).