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TMI Blog1980 (2) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these buses had been earmarked for contract purposes and were always ready and in a fit condition to ply on the road is not in dispute. It is common ground that the only reason why each of them was plied for less than 30 days was because the assessee did not get enough customers for those buses. In these circumstances, the question arose whether the assessee would be entitled to depreciation in respect of these four buses. The ITO declined to grant depreciation since these buses had not been " used " during the previous year for 30 days or more. The AAC took a different view and was of opinion that there was passive user of these buses which would entitle the appellant to claim depreciation. But on further appeal by the department the Appellate Tribunal upheld the view taken by the ITO and hence this reference at the instance of the assessee. The question that has been referred to us is : '' Whether, on the facts and in the circumstances of the case, the assessee-company was entitled to claim depreciation in respect of four buses which were kept ready for use throughout the previous year although the same were not actually used for more than thirty days ? " The present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umn of the following statement, according as the buildings, machinery, plant or furniture have been used by the assessee in his business, profession or vocation during the previous year, (i) for a period of 180 days or more, (ii) for a period of less than 180 days but more than thirty days or, (iii) for a period of thirty days or less than thirty days, respectively : ........" The Tribunal has taken the view that the terms of the amended rule indicate that in order to get depreciation, the asset in question must have been actively used for the specified number of days in the business of the asssee. The Tribunal has held that since the buses in question have not been actually plied by the assessee for more than thirty days during the previous year, the assessee would not be entitled to any depreciation in respect thereof. The question that arises for consideration in the present case is not entirely free from authorities but has arisen for consideration in different contexts. It first came up for consideration in the case of N. D. Radha Kishen and Sons v. CIT [1928] 3 ITC 73 (Lah). In this case, the assessee who had a motor car agency at Rawalpindi bought a foreign car for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being used. But that does not dispose of the question whether, when machinery is kept ready for use at any moment in a particular factory under an express contract from which taxable profits are earned, the machinery can be said to be used for the purposes of the business which earns the profits, although it is not actually worked. To my mind, it is so used. The business from which the profits were derived was that of ginning factories, and the contribution of the assessee to that business was the obligation to keep his machinery ready for actual use at any moment. It is, no doubt, true, as the learned Advocate General says, that, it is possible to give the word 'used' a more limited meaning and hold that it includes only the actual work of the machinery, and it is urged that it is that working which occasions depreciation. But I think that the word 'used' in this section may be given a wider meaning and embraces passive as well as active user. Machinery which is kept idle may well depreciate, particularly during the monsoon season. It seems to me that the ultimate test is, whether, without the particular user of the machinery relied upon the profits sought to be taxed could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not understand it was the intention of the Government in the case of factories working only during seasons to restrict the depreciation allowance with reference to the time factor, that is, with reference to the working season in relation to the year. The test really should be, in the case of seasonal factories, whether the machinery was available for use and for the whole use of agricultural purposes right through the working season. If that condition were to be satisfied, we see nothing in the rule or in the proviso thereto to disentitle the assessee to the whole of the depreciation allowance for that year, though the machinery could have been used only for a portion of the year, that is, during the working season. A very literal interpretation of the proviso would lead even to this absurdity. Obviously, the machinery could not be used all day right through the year. There are the normal working hours even during the day. There are holidays in the year. If depreciation allowance is to be calculated only with reference to the actual time the machinery was used, obviously, the provision in section 5(f) read with rule 4(3) would lead to this, that the provision for depreciation allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Barendra Kumar Ghosh v. Emperor, AIR 1925 PC 1, ' They also serve who only stand and wait '. Though a telephone is meant for receiving sound from a distance, it is said to be used by a person even though the person is not actually receiving any sound with its help. A burglar alarm can be said to be in use at a given moment even though there is no burglar in the premises and the alarm is not ringing at the moment. An article which is meant for yielding a certain result and which yields the result not continuously but periodically as and when required, cannot be said to be not in use at a particular time simply because it is not yielding the result at that time. If it is capable of yielding the result and is available for producing the result, it is in use. It is only that article which is meant to go on yielding the result continuously that can be said to be not in use at a time when it is not yielding the result. A truck to be used for the purpose of the business of plying trucks and lorries on hire is not an article of this kind, not being meant to be used continuously without a break. Hiring is always for a certain time or for a certain distance and as soon as the time is over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be shown to have been used by the assessee in the business which it was carrying on in the previous year. Reference was made to the earlier decision in the case of Viswanath Bhaskar Sathe [1937] 5 ITR 621 (Bom), where it had been held under similar circumstances that the assessee was entitled to depreciation allowance, to the decision of the Patna High Court in CIT v. Dalmia Cement Ltd. [1945] 13 ITR 415, where same principles had been applied, and to Niranjan Lal Ram Chandra [1963] 49 ITR 177 (All) which, it was pointed out, had not dissented from the decision in Sathe's case [1937] 5 ITR 621 (Bom). The words " used for the purposes of the business " are capable of a larger and a narrower interpretation. If the expression " used " is construed strictly, it can be taken as connoting or requiring the active employment or the actual working of a machinery, plant or building in the business. On the other hand, the wider meaning will include not only cases where the machinery, etc., is actively employed but also cases where there is, what may be described as, a passive user of the same in the business. The above survey of the decisions on the subject clearly shows that the consensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said, without straining the language of the statute and the context in which it is employed, that the buses were used for the purposes of the business throughout the year though they were not actually plied on the roads for more than 30 days. We do not think that the language used in the Rules is inconsistent with this interpretation. The amendment of 1960 is of no particular significance because even under the earlier rules, minimum use of the asset for two months was necessary. However, the word " used " employed in the Rules should first of all be interpreted only in a sense in which it will be consistent with the language in the statute and cannot be given a wider meaning. That apart, by giving the word the meaning which we have referred to earlier, the purpose of the rule is not in any way defeated. It will still be applicable to several cases. For example, where a machinery has been purchased only in the last month or where the machinery was unfit to be employed and not available for employment in the business for a specified period, the restriction in the rule will operate. The concept of proportionate allowance of rates in the Rules is, therefore, not inconsistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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