1995 (8) TMI 103 - AT - Income Tax

Assessing Officer, Assessment Year, Claim For Depreciation, Plant And Machinery, Previous Year

Summary

Issues:
1. Disallowance of depreciation claimed by the assessee for the assessment year 1990-91.
2. Whether the business of the assessee had commenced and if depreciation was admissible.

Detailed Analysis:
1. The appeal was against the order of the CIT(A) upholding the decision of the Assessing Officer to disallow the depreciation claimed by the assessee. The Assessing Officer disallowed the depreciation as the business activities had not commenced, resulting in the disallowance of Rs. 9,48,992 claimed by the assessee. The CIT(A) upheld this decision, stating that no commercial production had started by the assessee. The case revolved around whether the business had commenced and if commercial billing had occurred for the activities.

2. The assessee, a resident company engaged in creating graphics using laser technology, returned a loss of Rs. 12,29,030 for the accounting year ending on 31-3-1990. The Assessing Officer contended that since the business had not started, depreciation was not admissible. The assessee argued that trial production had been done, and a demonstration was made to customers on 31-3-1990. The Assessing Officer doubted this claim based on the absence of commercial billing and concluded that no commercial production had started. The CIT(A) sustained the disallowance of depreciation, prompting the appeal.

3. During the appeal, the assessee relied on a Tribunal decision where depreciation was allowed for vehicles kept ready for use, even if not utilized due to work scarcity. The Tribunal directed the Assessing Officer to allow depreciation in such cases. The business of the assessee involved services like phototype setting and pre-press activities using specific equipment. The integration of the system was described involving networking of computers and systems. The claim that trial production was done and the system was ready for commercial production was supported by evidence, including a report from Linotype Ltd. The Tribunal held that the claim for depreciation was valid, citing similar cases and the peculiar nature of the business and machinery involved.

4. The Tribunal found the claim of the assessee regarding trial production and readiness for commercial production to be valid and authentic. Relying on precedents and the nature of the business, the Tribunal directed the Assessing Officer to grant the depreciation claimed by the assessee. The decision was based on the integration of the system, evidence presented, and the readiness of the system for commercial production pending customer orders. The appeal was allowed in favor of the assessee.