Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

January 2014

Depreciation: Section 32: A. Y. 1998-99: User of machinery: Machinery kept ready for use but not used because of extraneous reasons: Assessee entitled to depreciation:

By K. B. Bhujle, Advocate
Reading Time 2 mins
fiogf49gjkf0d
CIT vs. Chennai Petroleum Corporation Ltd.: 358 ITR 314 (Mad):

The assessee had built the gas sweetening plant in the previous year(i.e. F. Y. 1996-97) relevant to the A. Y. 1997-98. The plant was commissioned in that year by running a test run. Considering the trial as equivalent to putting the said plant to use, depreciation was allowed by the Department in the A. Y. 1997-98. However, due to non-availability of the raw material, the plant was not run in the F. Y. 1997-98. Therefore, the Assessing Officer disallowed the claim for depreciation in the A. Y. 1998-99 on the ground that the plant was not used at any time in the relevant year. The Tribunal allowed the assessee’s claim holding that once the plant was ready for use, the assessee was entitled to depreciation.

On appeal by the Revenue, the Madras High court applied the judgment of the Bombay High Court in Whittle Anderson Ltd. vs. CIT; (1971) 79 ITR 613 (Bom), upheld the decision of the Tribunal and held as under:

 “i) So long as the business is going one and the machinery is ready for use but due to certain extraneous circumstances, the machinery could not be put to use, the fact would not stand in the way of granting relief u/s. 32 of the Incometax Act, 1961.

 ii) On the admitted case that the business was a going concern and the machinery could not be put to use due to raw material paucity, the machinery was entitled to depreciation.”

You May Also Like