Document Fragment View

Matching Fragments

plant was kept 'read-to-use' though could not be used for reasons and circumstances beyond the control of the assessee. The decision thus turns on the 'ready to use' being a sufficient compliance of the condition of user in s. 32(1). The argument appears to be that the plant, though could not be worked due to non-availability of the raw material, is yet kept ready for use, which may be regarded as a passive, as against active, user. The argument has appeal only where the supply of raw material is expected to be restored soon or, even otherwise, imminent. In the present case, however, the absence of supply continues for years. How is the assessee, then, able to produce? Is the process outsourced? How are the others in the industry faring in this regard? There is in fact nothing on record to show that the gas sweetening plant was kept in a 'ready-to-use' state during the relevant previous year. How could then, one may ask, the said order be applicable for the current year? Reliance thereon by the ld. CIT(A) is mechanical and misplaced. To be fair, we notice that though such a contention was raised before him (para 6.1 of the impugned order), i.e., of the asset being kept ready for use, the same is without reference to any material. He ought to have, rather than proceeding on that basis, i.e., assuming it to be correct, ought to have required the assessee to substantiate the same, observing the procedure u/r. 46A. And even where considered proper to admit additional evidence, i.e., considering that though it is principally the assessee's duty to prove it's claims, the AO also ought to have called upon the assessee to do so, the first appellate authority could have proceeded in the matter only after observing the procedure u/r. 46A(2). The matter, it needs to be appreciated, is factual, and it is highly improbable that a plant, idle for years (due to unavailability of raw material), is yet kept in a 'ready for use' state. There is also nothing on record toward any development suggesting an anticipated regular supply of raw material (sour gas). Why would then the company keep the plant in a 'ready to use' state, entailing upkeep & maintenance costs? In fact, ITA Nos. 1858 & 1980/Mds/2011 (AY 2004-05) Chennai Petroleum Corporation Ltd.

as to discard the earlier arrangement as unfeasible or uneconomical or, plainly, as not legal/keeping with public policy - as, for example, where the raw material (sour gas) has, or results in, (higher) pollutant/s. The position is completely unexplained, much less, examined. There could be no presumption as to passive user under the circumstances. The same, it may be appreciated, is only when the actual supply of raw material is imminent, so that it could reasonably be argued that the plant is kept ready impending the receipt of the raw material, as where a purchase order for the same stands issued. We have, on principle, abundantly clarified that a passive user, even citing examples thereof, where so, would entitle depreciation. Two, the Hon'ble Court in that case disregarded the Revenue's contention of the words 'put to use' in the following year, as appearing in the second part of s. 33, on the ground that the same may hold or apply where a new business is being set up, so that the asset is first put to use in that year. The two limbs were separate. The words 'used' and 'put to use', occurring in sec. 32(1) and the second proviso thereto respectively, however, form part of one integrated code, to be assigned the same meaning and understood in the same sense. It could not be otherwise. The said decision would therefore not apply in the present case. Further, we also clarify that we state so on the basis of an appreciation of facts, which is, with respect, missing in the tribunal's order supra. In fact, the cited decision by the Hon'ble High Court was relied upon only by the ld. third member.