TMI Blog2015 (1) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... stalled or in the year in which the machinery is first put to use and that being the immediate succeeding assessment year. Date on which the commercial production started was 01.03.1981 the assessment year considered by the assessee was rightly 1982- 83. In fact it goes without saying that even in the statement of facts, it is a matter of factual assertion that the IAC (Asstt.) has noted that the assessee had not claimed any Investment Allowance on the assets for the year 1981-82. - Court in complete agreement with the reasonings adopted by the Tribunal and the findings of fact arrived at and do not see any reason for interference - Decided against Revenue. - INCOME TAX REFERENCE NO. 7 of 2003 - - - Dated:- 28-11-2014 - MR. KS JHAVERI AND MR. K.J.THAKER, JJ. FOR THE APPELLANT : MR NITIN K MEHTA, ADVOCATE FOR THE RESPONDENT : MR RK PATEL, ADVOCATE JUDGEMENT Per: K S Jhaveri: 1. This Court vide order dated 25.02.1997 directed the Tribunal to draw up a statement of Case and refer the question of law stated in the said order to this Court and accordingly this reference has come before us for consideration. The following question has been referred by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at depreciation could not have been claimed in the previous year but in view of the amendment or change in law the assessee has claimed depreciation in the subsequent year though he has claimed depreciation of capital expenses in the previous year. He submitted that drawings and designs on which expenditure was incurred had been utilized in the year 1981-82 that being the year in which the plant and machinery (main furnace) had been installed and kept ready for use. 3.2 Mr. Mehta has drawn the attention of this Court to the observations made by the Assessing Officer and submitted that the view taken by the Tribunal may be modified and the decision of CIT(A) may be restored. He submitted that the depreciation ought to have been claimed in the year 1981-82. In support of his submissions, Mr. Mehta has relied upon a decision of the Rajasthan High Court in the case of CIT vs. Nakoda Metals reported in [2006] 204 CTR 514 (Raj) as well as a decision of this Court in the case of Assistant Commissioner of Income-Tax vs. Ashima Syntex Ltd. reported in [2001] 251 ITR 133, decision of Calcutta High Court in the case of Commissioner of Income Tax vs. Union Carbide (I) Ltd. reported in [2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of machinery during the previous year for the purpose of business of assessee itself amounts to user of the machine within the meaning of Section 32 or 32A. 11. Since all the questions depend on the answer of question whether the machinery acquired and installed during the previous assessment year was used for assessee's business, no question is required to be referred to this Court. 4.1 Similarly in the case of Ashima Syntex Ltd. (supra), this Court has observed as under: Thus, it is clear that the settled position in law is that it is not necessary that the machinery must be used for a particular number of days so as to entitle for depreciation, but it requires that it should be used for the purpose of business or profession or vocation. The trial run of the machinery is obviously for the purpose of business and not for any other purposes. What is required to be seen that the machinery must be used for the purpose of business and keeping in mind the wider meaning ascribed by various decisions of various courts for the term use, even trial production of a machinery would fall within the ambit of used for the purpose of business. Further, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance can be claimed, if the asset in question is shown to be capable of diminishing in value on account of any factor known to the prevailing accounting or commercial practice (see CIT v Elecon Engineering Co Ltd [1974] 96 ITR 672 (Guj)). The two ingredients for depreciation allowance are: (i) that the depreciable asset is owned by the assessee, and (ii) that it is used for the purpose of the assessee's business or profession subject, however, to the provisions of section 34 These aspects have been elaborately dealt with by one of us... 5. Mr. R.K. Patel, learned advocate appearing for the assessee supported the impugned order and submitted that in view of the fact that gas was not supplied by ONGC and therefore there was no other option but to change the burner and same was installed only in February 1981. He submitted that trial production was started on 01.03.1981 which falls in assessment year 1982-83. He further contended that the Tribunal rightly accepted the contentions raised by the assessee. He has drawn the attention of this Court to the observations made by the Tribunal and submitted that the same being in accordance with law does not call for any interference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id of these drawings and designs but the same was put to use only in A.Y. 1982-83. We have already accepted the assessee's claim in respect of Investment Allowance on various items of plant and machinery including the kiln in question. A common sense view would require that both the things should be considered together viz. the drawing and designs as also the amount spent on the construction of the kiln although the other view is also possible i.e. the examination of the claim in erspect of each of the items isolated from the other. We however propose to consider the claim as consolidated one for both the items and accept the assessee's arguments in respect of Investment Allowance on drawings and designs in A.Y. 1982-83 itself. 6.3 The provisions of section 32A which reads as follows gives an option to the assessee to make the claim either in the year in which the machinery is purchased and installed or in the year in which the machinery is first put to use and that being the immediate succeeding assessment year. 32A. Investment allowance (1) In respect of a ship or an aircraft or machinery or plant specified in sub- section (2), which is owned by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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