Depreciation : Business expenditure : S. 32 and S. 37 of Income-tax Act, 1961 : A.Y. 1994-95 : Closure of business due to riots : Closure for reasons beyond control of assessee : Assessee entitled to depreciation and business expenditure.

[CIT v. Blend Well Bottles P. Ltd., 323 ITR 18 (Kar.)]

The assessee was engaged in the manufacture and sale of
Indian-made foreign liquor. In the financial year ending 31-3-1994 the assessee
had not carried on the manufacturing activities as the business was closed on
account of local problems. The Assessing Officer therefore disallowed the claim
for depreciation for the A.Y. 1994-95. The Tribunal allowed the assessee’s claim
and held that the assessee is entitled to depreciation and business expenditure.

On appeal by the Revenue, the Karnataka High Court upheld the
decision of the Tribunal and held as under :

“(i) The business premises of the assessee were situated in
Punjab. On account of riots and other activities in the place, where the
factory of the assessee was situated, the assessee was forced to close down
the activity till peace was restored in the locality. This fact was not
disputed by the Revenue.

(ii) If for reasons which were beyond the control of the
assessee, its business activities were closed, such a closure could not be
treated as a closure with an intention to close the business once for all and
such closure had to be treated as an act of God or vis major. The assessee
would be entitled to claim depreciation as well as business expenditure u/s.32
and u/s.37 of the Income-tax Act, 1961, respectively.”