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TMI Blog2014 (8) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of its cement factory at Gujarat. 3. Rival contentions have been heard and record perused. Facts in brief are that assessee had claimed depreciation in respect of the machineries which were stated to have been installed and put to use in the production of clinker which is intermediates stage for production of cement. The AO observed that even if the assessee had produced 100 MT of clinker it was only a trial run for one day and this quantity was minuscule compared to the intended production capacity and that the assessee was not able to prove that after the trial run, commercial production of clinker was initiated within reasonable time. The AO pointed out that the trial runs continued till October 1997 before the reasonable quantity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction started. In the present case, the trial production by the assessee cannot be considered as the date of user by the assessee. One cannot ignore the facts that there was substantial gap between the first trial run and subsequent trial runs and commercial production. It is not the case of the appellant that trial runs continued and the appellant continued to do trial production without break till it started commercial production. From the long gap between the first trial run and subsequent trial runs it can be said that the installation of plant and machinery even for production of clinkers was not satisfactorily completed and was still in installation stage." 5. We have considered rival contentions, carefully gone through the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant commences operation and reasonable quantity of product is produced, the business is set up. This is so even if the product is sub-standard and not marketable. Industrial Solvents & Chemicals Pvt. Ltd was entirely a new company. The Court held that once the business is set up, the expenses incurred thereafter will have to be treated as incurred in the course of business and on the same basis the depreciation and development rebate admissible to the assessee company would have to be determined. 7. In view of the above judicial pronouncements, we do not find any justification on the part of the lower authorities for decline of the claim of depreciation when the fact of assessee having used the machinery for trial run was not declined by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for disturbing the method of accounting followed by the appellant on consistent basis. It is also informed by the appellant that the Hon'ble ITAT for the A. Y. 1988-89 has also deleted similar addition. As in the regular assessment for the same assessment year, the addition made by the AO has been directed to be deleted by the ld. C!T(A), it cannot be said that for the purpose of computation of book profit the liability is unascertained while for the purpose of computation of total income the liability was ascertained and hence rightly reduced from value of closing stock. The addition made by the AO to the book profit on account of provision for ECC job is, therefore, directed to be deleted. The ground of appeal no. 5 is allowed." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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