TMI Blog2000 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner that even though the business was closed there was a passive user of the machinery and as such the assessee was entitled to claim depreciation on the machinery during the assessment year 1971-72 ?" The factual position is almost undisputed. The assessee owns a cold storage at Karnal. During the assessment proceedings for the assessment year 1971-72, the Income-tax Officer noticed that the machinery installed was not put to use during the whole of the previous year. The non-user was on account of the fact that there was a very weak crop of potatoes available in the season and potatoes did not come from the hirers in the cold storage. Therefore, there was no business from cold storage. Accordingly the claim for depreciation on cold st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal. On consideration of the materials on record the Tribunal came to hold that the Appellate Assistant Commissioner's conclusions were in order. It noted specifically that the Assessing Officer himself had all owed expenses claimed on account of the business of cold storage and, therefore, there was no justification to disallow the claim of depreciation. At the instance of the Revenue, the reference as aforestated has been made. Learned counsel for the Revenue submitted that since there was no working of the machinery, depreciation cannot be allowed, and the Appellate Assistant Commissioner and the Tribunal were not justified in directing allowance of depreciation. There is no appearance on behalf of the assessee in spite of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of the business" are capable of a larger and a narrower interpretation. If the expression "used" is construed strictly, it can be taken as connoting or requiring the active employment or the actual working of a machinery, plant or building in the business. On the other hand, the wider meaning will include not only cases where the machinery, plant, etc., are actively employed but also cases where there is what may be described as a passive user of the same in the business. An asset can be said to be in use when it is kept ready for use. Like every other animate and inanimate object, business premises, machinery, plant or furniture employed by an assessee in the course of his business, profession, etc., have a limited effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and Accounts. 14th edition, page 47). For the purposes of determining the true profits in the commercial sense or under the proper principles of accountancy, the wear and tear of the assets utilised by the assessee for the purpose of earning his profit will have to be considered and allowance will have to be made for wear and tear. This is what is notionally understood as depreciation (see CIT v. Bombay State Transport Corporation [1979] 118 ITR 399 (Bom)). The allowable depreciation amount is a capital loss to the depreciable asset which must be replaced first to give a true or correct picture as otherwise there is bound to be a distorted picture in the profit and loss account. The depreciation amount is to be treated as a charge on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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