2014 (10) TMI 794 - HC - Income Tax

Depreciation plant and machinery used in trial production - Whether the Tribunal is right in disallowing the assessee s claim for depreciation allowance u/s 32 in respect of plant and machinery used in trial production during the year Held that - Following the decision in Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. 2000 (8) TMI 22 - GUJARAT High Court - plant and machinery was used till the end of the accounting year - Law does not require that there must be optimum production for granting the benefit - Law only requires that there must be use of plant and machinery for the purpose of business - The assessee was entitled to depreciation on the machinery Decided in favour of assessee.

Summary

Issues: Challenge to disallowance of depreciation claimed by the assessee for plant and machinery used in trial production.

Analysis:
1. The appellant, the original assessee, challenged the judgment of the Income Tax Appellate Tribunal, which dismissed the appeal and disallowed the depreciation claimed for plant and machinery used in trial production during the relevant assessment year.
2. The main issue framed by the Court was whether the Tribunal was correct in law and on facts in disallowing the depreciation allowance under section 32 of the Income Tax Act, 1961. The appellant's counsel relied on precedents to support their case, citing the decision in the case of Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. and Commissioner of Income-Tax v. Mentha and Allied Products.
3. The appellant contended that the Tribunal had erred in rejecting the claim for depreciation, emphasizing that the plant and machinery were indeed used for business purposes during the relevant period. The Tribunal's decision was based on the timing of success in the trial production, but the appellant argued that the law only required the use of plant and machinery for business purposes to qualify for depreciation.
4. The Court, in line with the precedents cited, held in favor of the assessee, stating that no elaborate discussion was needed as the facts of the case aligned with the decisions referred to. The Court emphasized that the key factor for granting depreciation was the use of plant and machinery for business purposes, rather than achieving optimal production levels.
5. Consequently, the Tax Appeal was allowed in favor of the assessee, overturning the decision of the Tribunal and granting the depreciation claimed for the plant and machinery used in trial production.