TMI Blog2013 (8) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent : Mr. Venkata Narayanan for M/s.Subbaraya Aiyar JUDGMENT (The Judgment of the Court was made by Chitra Venkataraman, J.) The following substantial questions of law are raised by the Revenue in the present Tax Case Appeal preferred as against the order of the Income Tax Appellate Tribunal, Chennai 'A' Bench dated 23.10.2009 passed in ITA.No.1822/Mds/2006 for the assessment year 1998-99. "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee was entitled to claim depreciation of Rs.2,76,68,250/- on the Gas Sweetening Plant which was not actually used for the purpose of assessee's business at any time during the relevant previous year and when the condition of actual user for the purpose of business prescribed under Section 32 of the Act has not been fulfilled? 2. The assessee claimed depreciation on Gas Sweetening Plant in the previous year relevant to the assessment year 1998-99. The claim was, however, rejected by the Assessing Officer on the ground that the plant was not used at any time for the purposes of the business, as required under Section 32(1) of the Income Tax Act,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04. 5. The claim of the assessee, however, was rejected by the Assessing Officer on the ground that when the asset had never been put to use during the whole of the previous year relevant to the assessment year 1998-99 i.e., the second year of installation of the plant, grant of relief could not be maintained under law. In so holding, the Assessing Officer placed reliance on the decision in the case of CIT Vs. Oriental Coal Company Limited reported in 206 ITR 682. Thus, the assessment was completed. 6. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who also rejected the assessee's appeal, which led to filing of further appeal before the Income Tax Appellate Tribunal. 7. In support of its contention that the machinery, even though was not working on account of non-availability of raw material, yet, in view of its readiness to function, the relief should have been granted, the assessee placed reliance on the decision in the case of CIT Vs. Heera Financial Services Ltd., reported in 212 CTR 532, in the case of CIT Vs. Swarup Vegetable Products India Ltd., reported in 277 ITR 60 (Allahabad) in the case of CIT Vs. Nahar Exports Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tear, hence, the assessee was entitled to the claim for depreciation. In the circumstances, the Accountant Member allowed the appeal. 12. Learned Judicial Member, however, took a different view based on the decision in the case of CIT Vs. Maps Tours and Travels reported in (2003) 260 ITR 655 as well as in the case of CIT Vs. Vayithri Plantations Ltd reported in 128 ITR 675. Learned Judicial Member pointed out that after the amendment to Section 32(1) of the Income Tax Act, 1961 made by Taxation Law (Amendment and Miscellaneous Provision) Act, 1986 with effect from 01.04.1988, assets should be such, as has been used for the purpose of the business, profession or vocation for at least a part of the year. Thus, unless the assets have been put to use, the claim of the assessee could not be granted. In this connection, learned Judicial Member referred to the decision of the Bombay High Court in the case of Dineshkumar Gulabchand Agarwal Vs CIT reported in 267 ITR 768 holding that the word 'used' meant 'actually used' and not merely 'ready for use'. Learned Judicial Member pointed out that in the case of CIT Vs. Maps Tours and Travels reported in (2003) 260 ITR 655, cars bought on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Vs. Mc.Dowell and Co.Ltd., (No.2) reported in (2009) 314 ITR 174, learned Vice President pointed out that the Apex Court remanded the case to the Assessing Officer for finding out the relevant facts and hence, the same cannot be of any assistance. As far as the decision in the case of CIT Vs. Maps Tours and Travels reported in (2003) 260 ITR 655 was concerned, the judgment turned on its peculiar facts therein. However, in view of the decision of the Bombay High Court in the case of the Whittle Anderson Ltd Vs. CIT reported in (1971) 79 ITR 613 and the decision in the case of CIT Vs. Viswanath Bhaskar Sathe reported in (1937) 5 ITR 621 (Bom), learned Vice President agreed with the learned Accountant Member that the case of the assessee merited to be answered in its favour. Thus, the Third Member-Vice President agreed with the Accountant Member and granted the relief. Aggrieved by this, Revenue has preferred this Tax Case Appeal. 15. Section 32 of the Income Tax Act, as is relevant for consideration, reads as under:- " Section 32. Depreciation-(1) In respect of depreciation of - (i) buildings, machinery, plant or furniture being tangibel assets; (ii) know-how, patents, copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores used for the purposes of the business, profession or vocation the amount of any premium paid ; (v) in respect of current repairs to such buildings, machinery, plant, or furniture, the amount paid on account thereof ; (vi) in respect of depreciation of such buildings, machinery plant, or furniture being the property of the assessee, a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed : ............. (vii) in respect of any machinery or plant which has been sold or discarded, the amount by which the written down value of the machinery of plant exceeds the amount for which the machinery or plant is actually sold or its scrap value : Provided that such amount is actually written off in the books of the assessee : Provided further that where the amount for which any such machinery or plant is sold exceeds the written down value, the excess shall be deemed to be profits of the previous year in which the sale took place .................. " The Apex Court pointed out that the criti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to embrace passive as well as active use. When machinery was kept ready for use at any moment in a particular factory under an express agreement from which taxable profits were earned, the machinery could be said to be "used" for the purposes of the business which earned the profits although it was not actually worked. In so holding, the Bombay High Court followed the decision reported in (1937) 5 ITR 626 (Bhikaji Venkatesh Vs. Commissioner of Income Tax). 18. We are in entire agreement with the view expressed by the Bombay High Court in the decision reported in (1971) 79 ITR 613 (Whittle Anderson Ltd Vs. Commissioner of Income Tax, Bombay City I.) following the decision reported in (1937) 5 ITR 626 (Bhikaji Venkatesh Vs. Commissioner of Income-tax ) in the light of the decision of this Court reported in 128 ITR 675 (CIT Vs. Vayithiri Plantations Ltd). 19. Even though learned Standing counsel appearing for the Revenue contended that such decision related to the case of development under Section 33 of the Income Tax Act, yet, this Court referred to the decision under Section 32 of the Income Tax Act in the context of the expression 'used for the purpose of business' as explain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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