TMI Blog2000 (3) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, the Tribunal is right in law in holding that the mere fact that they were kept ready for use would be enough to the grant of depreciation on the principles of passive user of asset ?" The factual position, as highlighted in the statement of case, is as follows : The assessee purchased two tippers on March 29, 1986, and claimed depreciation for the assessment year 1986-87 on the same. The Assessing Officer did not allow depreciation on the ground that the assessee had not produced any evidence to show that they were put to use before March 31, 1986. He observed that even though tippers were taken delivery on March 29, 1986, at Pondicherry, there was no evidence to show that they were delivered at the work si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if it is accepted, as contended by the Revenue, there was no actual user, the fact that they were kept ready for use would be enough for grant of depreciation on the principle of passive user of the asset. Accordingly, the claim of depreciation was allowed. A reference was sought for by the Revenue and as aforementioned, the said prayer was accepted by the Tribunal. Learned counsel for the Revenue submitted that even though it is accepted that depreciation can be granted when an asset is ready for use by application of the principle of passive user of the asset, yet there must be some material to show that the asset was ready for use at the work site. Purchase was made on March 29, 1996, and considering the time gap necessary for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question. The object of the Legislature, in granting depreciation allowance under section 32 of the Act, is to give due allowance to the assessee for wear and tear suffered by the asset used by him in his business so that the net income (total income) is duly arrived at. There is no factual dispute that the assets in question were owned by the assessee. In Machinery Manufacturers Corporation Ltd. v. CIT [1957] 31 ITR 203 (Bom), it was observed that the expression "used" in section 10(2)(vi) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the old Act") corresponding to section 32 of the Act has to be given a wider meaning. The expression includes passive as well as active user. In CIT v. Dalmia Cement Ltd. [1945] 13 ITR 415 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he apparent profits from the business, profession, etc., would not give a correct picture. Allowance for depreciation is borne out of necessity for such recompense. "Depreciation", according to Webster's New World Dictionary, means "a decrease in value of property through wear, deterioration or obsolescence : the allowance made for this in book-keeping, accounting, etc.". Depreciation is the inherent decline in the value of an asset from any cause whatsoever (as observed by William Pickles in Accountancy, page 74). Depreciation is the diminution which takes place in the value of a wasting asset despite the amount expended on it in repairs (as stated in The Business Encyclopaedia, Volume 11, page 365). Depreciation is the measure of the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, but also those referring to the suitability of the asset as an economically productive unit after a period of time. The depreciation allowance under section 32 is, however, a statutory allowance not confined expressly to diminution in value of the asset by reason of wear and tear. The allowance 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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