TMI Blog2014 (8) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to 50%, if he finds that machinery was used for less than 180 days during the year under consideration. Computation of book profit u/s.115JA - provision made for ECC jobs was directed to be reduced from book profit on the plea that it was ascertained liability - Held that:- While working the book profit u/s.115JA, the AO has added the provision for ECC jobs. We also found that the provision made for ECC jobs was for ascertained liability which was also added by the assessee in the valuation of work-inprogress. Thus, effectively, it was not an item of profit and loss account but was an item of trading account insofar as it was also added in work-in-progress forming the part of trading account. We found that similar additions made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inued till October 1997 before the reasonable quantity of clinker was produced. The AO held that use of machinery for trial production cannot be deemed to be user for the purpose of business and therefore depreciation on plant and machinery used in production of clinker cannot be allowed. The AO disallowed the claim of depreciation of ₹ 34,79,40,576/-. 4. By the impugned order, CIT(A) confirmed the disallowance by observing as under :- 5.5 I have considered the submissions of the appellant. As per section 32 the depreciation can be allowed only if the assets have been used for the purpose of business carried on during the year. The expression 'used for the purpose of business or profession means that the assets were capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve considered rival contentions, carefully gone through the orders of the authorities below and found from the record that neither the AO nor the CIT(A) has disputed the trial run of the cement plant for manufacturing of clinker. The CIT(A) confirmed the action of the AO merely on the plea that trial run production by the assessee cannot be considered as use of machinery by the assessee. The CIT(A) also observed that there was substantial gap between the first trial run and subsequent trial runs and commercial production. By observing that assessee continued to do trial production without break till it started commercial production, the CIT(A) disallowed assessee s claim of depreciation. There is no merit in the action of the lower authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee having used the machinery for trial run was not declined by any of the lower authorities. Even use of machine for one day will entitled the assessee for claim of depreciation. Since it is not clear from the record as to the period for which machinery was actually used by assessee, we direct the AO to verify the period of used and restrict the claim of depreciation to 50%, if he finds that machinery was used for less than 180 days during the year under consideration. 8. In the appeal filed by the Revenue, action of the CIT(A) was objected with regard to computation of book profit u/s.115JA, wherein provision made for ECC jobs was directed to be reduced from book profit on the plea that it was ascertained liability. 9. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job is, therefore, directed to be deleted. The ground of appeal no. 5 is allowed. 11. We have considered rival contentions and found that while working the book profit u/s.115JA, the AO has added the provision for ECC jobs. We also found that the provision made for ECC jobs was for ascertained liability which was also added by the assessee in the valuation of work-inprogress. Thus, effectively, it was not an item of profit and loss account but was an item of trading account insofar as it was also added in work-in-progress forming the part of trading account. We found that similar additions made in the A.Y.1988-89 was also deleted by the Tribunal in assessee s own case. Accordingly, we do not find any infirmity in the order of CIT(A) fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
