ITO V/s Tropicana Beverages Company (ITAT Delhi)- when it is established that the machinery on which depreciation has been claimed by the assessee, had been provided by the assessee to Dynamix for the purpose of manufacturing the product of the assessee, necessarily the machinery was used for the purpose of the business of the assessee. That being so, “used for the purposes of the business” in section 32 of the Act is applicable to the assessee.
The words “used for the purposes of the business” in section 10(2)(iv) of the Indian Income Tax Act, 1922, which expression is the same as that employed in section 32 of the I.T. Act, 1961, under which the assessee has made the claim of depreciation in the present case, meant that the machinery and plant is used for the purpose of enabling the owner to carry on the business and earn profits in the business; and that therefore, the assessee was entitled for claiming depreciation.
Income Tax Officer V/s. Tropicana Beverages Company
Decided By – ITAT Delhi
ITA NO. 4631 (Del)2010
Assessment year: 2006- 07
Decided on – 17.06.2011
PER A.D. JAIN, J.M.
This is Department’s appeal for the assessment year 2006-07 contending that the learned CIT(A) has erred in deleting disallowance of depreciation amounting to ‘ 15,83,047/-, when the assets were not put to use for the business of the assessee company.
2. During the year under consideration, the assessee Private Limited Company derived income from the trading of packed fruit juices under the brand name “Tropicana”. It purchased packed fruits from M/s. Dynamix Dairy Products Ltd., Pune. It claimed depreciation of ‘ 15,83,047/- on plant and machinery stated to have been used for business purposes. The AO disallowed this claim, observing that the assessee had not derived income from the trading of packed fruit juices and had never indulged in any sort of manufacturing activities during the year; that the machinery had been installed at E-94, MIDC, Baramati (Pune); that the said premises belonged to M/s. Dynamix Dairy Product Ltd., which was supplier of packed juices to the assessee company; that the plant and machinery was actually being used by M/s. Dynamix Dairy Product Ltd. and the same was not used by the assessee; that on query, the assessee had failed to prove that it had actually put the machinery to business use as defined u/s 32 of the Income Tax Act; that actually, the entire machinery had never been used during the relevant previous year by the assessee; that the assessee had failed to produce any evidence in respect of its claim of depreciation on plant and machinery; that as such, the depreciation claimed was not allowable to the assessee; and that the depreciation on plant and machinery had also been disallowed in the earlier years, on similar grounds.
3. By virtue of the impugned order, the ld. CIT(A) deleted the dis allowance.
4. The ld. DR has contended that while wrongly deleting the dis allowance correctly made, the ld. CIT(A) has failed to consider the fact that the assets, i.e., the machinery was never put to use by the assessee for its business premises.
7. The aforesaid Tribunal order has not been shown to have been set aside, quashed or even stayed on appeal. No decision to the contrary has also been placed before us. The facts for the year under consideration have also not been shown to be any different from those before the Tribunal for assessment year 2004-05(supra).
8. Now, when it is established that the machinery on which depreciation has been claimed by the assessee, had been provided by the assessee to Dynamix for the purpose of manufacturing the product of the assessee, necessarily the machinery was used for the purpose of the business of the assessee. That being so, “used for the purposes of the business” in section 32 of the Act is applicable to the assessee, in keeping with “The Liquidators Of Pursa Limited v. CIT”(supra), as held by the Tribunal in the assessee’s case for assessment year 2004-05.
9. Therefore, respectfully following the aforesaid Tribunal order, we do not find any force in the grievance sought to be raised by the Department. The ld. CIT(A) has correctly followed the Tribunal order in the asses see’s own case for assessment year 2004-05(supra). Accordingly, the impugned order is upheld, while rejecting the ground raised by the Department. 10. In the result, the appeal filed by the Department is dismissed.
Order pronounced in the open court on 17.06.2011.