[CIT v. Yamaha Motor India (P) Ltd., 226 CTR 304
(Del.)]
In an appeal filed by the Revenue u/s.260A of the
Income-tax Act, 1961, the following two questions were raised before the High
Court :
“(a) Whether the Income-tax Appellate Tribunal
(hereinafter ‘Tribunal’) was correct in law in directing the AO to recompute
the depreciation after reducing scrap value of the assets, which have been
discarded and written off in the books of account for the year under
consideration from the WDV of the block of assets ?
(b) Whether provisions of sub-clause (iii) to S. 32(1)
r/w. S. 43(6)(c)(B) are applicable to the present case when the assessee had
not complied with the primary conditions for eligibility of depreciation ?”
The Delhi High Court held as under :
“(i) The crux of the matter is : what is the meaning to
be ascribed to the expression ‘used for the purposes of the business’ as
found in S. 32 of the Income-tax Act, 1961. The provisions of S. 32 pertain
to depreciation. The contention of the Revenue is that with respect to any
machinery for which depreciation is claimed u/s.32, the same cannot be
allowed unless such machinery is used in the business and since
discarded machinery is not used in the business, therefore, with respect to
the discarded machinery no depreciation can be allowed.
(ii) As long as the machinery is available for use,
though not actually used, it falls within the expression ‘used for the
purposes of the business’ and the assessee can claim the benefit of
depreciation.
(iii) No doubt, the expression used in S. 32 is ‘used for
the purposes of the business’. However, this expression has to be read
harmoniously with the expression ‘discarded’ as found in clause (iii) of
Ss.(1). Obviously, when a thing is discarded it is not used. Thus ‘use’ and
‘discarding’ are not in the same field and cannot stand together. However,
if a harmonious reading of the expressions ‘used for the purposes of the
business’ and ‘discarded’ is adopted, then it would show that ‘used for the
purposes of the business’ only means that the assessee has used the
machinery for the purposes of the business in earlier years. It is not
disputed that in the facts of the present case, the machinery in question
was in fact used in the previous year and depreciation was allowed on the
block of assets in the previous years. Taking therefore a realistic approach
and adopting a harmonious construction, the expression ‘used for the
purposes of the business’ as found in S. 32 when used with respect to
discarded machinery would mean that the user in the business is not in the
relevant financial year/previous year, but in the earlier financial years.
Any other interpretation would lead to an incongruous situation.
(iv) Therefore, the Tribunal was correct in law in
directing the AO to recompute depreciation after reducing the scrap value of
the assets which have been discarded and written off in the books of account
for the year under consideration from the WDV of the block of assets.”
