TMI Blog2010 (12) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee objected to machinery being kept idle, resulting in loss of interest on investment, the stand of the assessee that the said machinery was installed to increase capacity of the plant, was not taken into account by the Assessing Officer and the CIT(A) – Stand of the assessee is that it resulted in increase of capacity of the plant and that on account of technical justification for the said machinery, items of the machines were installed. - Held that:- Even though the auditors may not have accepted the said stand, the assessee was entitled to free play in joints in taking a decision to install the machinery if in its view the same was necessary for its business. If the assessee was to install such a machinery on its bona fide business consideration, mere absence of proof of actual use thereof was not enough to deny the claim for depreciation -no ground to interfere with the finding of the Tribunal, holding that the assessee was entitled to depreciation on the machinery, as claimed, the appeal is partly allowed. - IT Appeal No. 515 of 2008 - - - Dated:- 17-12-2010 - Adarsh Kumar Goel, Ajay Kumar Mittal, JJ. Yogesh Putney for the Appellant S.K. Mukhi and Jyot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1992-93 and financial year 1992-93 respectively. The Assessing Officer also disallowed claim for deprecation on the machinery relying upon audit report of the auditors of the assessee that the machinery was neither used nor was in usable condition and was kept idle. The CIT(A) affirmed the view of the Assessing Officer but the Tribunal upheld the claim of the assessee as follows:- "4. Ground No. 3 is that the CIT (Appeals) was not justified in upholding the disallowance of 25,000 on account of education fund and 6,19,671 on account of subscription paid to Haryana State Cooperative Development Federation. It was submitted on behalf of the assessee that this issue stands decided in favour of the assessee by the order of the Tribunal for the assessment year 1995-96 in ITA No. 2519/Delhi/2000, dated 23-11-2004. In this order, the Tribunal has dealt with the amount of 25,000 paid as subscription to the education fund. It was noted that the amount was paid on the directions of the Registrar of the Cooperative Societies and such instructions, in the form of a letter, were received by the assessee during the relevant accounting year. In the year before us also, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the vapour cell, juice clarifier and sugar grader were idle from the earlier year which means they were installed without necessity. The fly ash arrestor was found to be not in working order. The assessee has pointed out, in its reply that these items of machinery were installed to increase the capacity of the plant and that they are all working properly. The reply of the assessee has not been taken note of by the income-tax authorities. The assessee has filed the depreciation chart as per the income-tax assessment for the year under appeal. On the plant and machinery in question, depreciation has been allowed in the earlier year. In pages 11 and 12 of the paper book, the assessee has also enclosed a certificate from the engineers justifying the installation of the various items of machinery mentioned by the auditors and explaining the justification for their installation. It has also been certified that these equipments which were installed in the earlier year were working smoothly in the year under appeal. In the light of the evidence adduced by the assessee, we are unable to uphold the strong argument raised by the learned CIT DR before us that though the machinery might have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93. Both these amounts are disallowed being not the financial year 1993-94, however, is allowed as deduction. Total disallowance under this head works out to 6,44,672." 8. Admittedly, the assessee followed mercantile system of accounting. In such situation, the deduction claimed could not be allowed in the year of payment but in the year when the amount were due. 9. As regards question (3), no doubt the auditors of the assessee objected to machinery being kept idle, resulting in loss of interest on investment, the stand of the assessee that the said machinery was installed to increase capacity of the plant, was not taken into account by the Assessing Officer and the CIT(A). Moreover, the Tribunal relied upon certificate of the engineers justifying installation of items of machinery. 10. We also find that expression 'used' in section 32 of the Act has been judicially interpreted to include machinery kept for use, even if the same was not actively used. Passive user has also been held to be user where it may be necessary for business of the assessee to keep the machinery ready for use. Reference may be made to the judgment of Delhi High Court in CIT v. Refrigeration and A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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