2008 (4) TMI 22 - SC - Income Tax

Revenue contends that after the introduction of the concept of block of assets , actual use is the only requirement apart from ownership for allowance of depreciation u/s 32 HC dismissed revenue s appeal as no question of law arise - Tribunal after analysing the material on record held that there is nothing to show that the machinery, namely, expellers remained idle for the entire block period 1-4-88 to 24-2-99 - not necessary for us to go into the larger question of law- appeal dismissed

Summary

Issues:
Interpretation of the term "used" in Section 32 of the Income Tax Act, 1961 for allowance of depreciation.

Analysis:
The Supreme Court dealt with the issue of whether the term "used" in Section 32 of the Income Tax Act, 1961 refers to actual use of the asset and whether ownership alone is sufficient for allowance of depreciation. The Department contended that actual use is a requirement for depreciation allowance, apart from ownership, especially in the context of the introduction of the concept of "block of assets." The Department argued that the High Court erred in not addressing this important legal question and instead dismissed the Tax Appeals on the ground that no substantial question of law had arisen.

The Tribunal, in the present case, examined witness statements and concluded that the machinery in question was not idle during the block period in consideration. Upon reviewing the evidence, the Supreme Court concurred with the Tribunal's findings on the facts of the case. Consequently, the Court found it unnecessary to delve into the broader legal question regarding the interpretation of the term "used" in Section 32 of the Income Tax Act, 1961.

As a result of the Tribunal's findings and the Supreme Court's agreement with those findings, the Civil Appeal filed by the Department was dismissed. The Court clarified that the question of law remains open for future consideration. No specific order as to costs was issued in this judgment.