Case Law Details
Pr. CIT Vs. M/s. Larsen and Toubro Ltd. (Bombay High Court)
Once plant commences operation and even if product is substantial and not marketable, the business can said to have been set up. Mere breakdown of machinery or technical snags that may have developed after the trial run which had interrupted the continuation of further production for a period of time cannot be held ground to deprive the assessee of the benefit of depreciation claimed.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-
1. In this appeal under section 260A of the Income Tax Act, 1961 being aggrieved by the order dated 27th August, 2014 in ITA/4771/Mum/2005 by which the revenue’s appeal was dismissed in relation to assessment year 199798, the revenue is in appeal before us. Cross appeals were filed in the matter of orders passed under Section 143(3) read with Section 147. By a common order passed in appeals, the Tribunal allowed the appeal of the assessee in part and dismissed the appeal of the Revenue.
2. The assessee was aggrieved by reopening of the assessment under Section 147 as also dis allowance of a claim of depreciation in respect of its clinker/ cement factory at Gujarat. The assessee had claimed depreciation in respect of the machinery installed and put to use in the production of cement. A trial run was conducted for one day and the quantity produced was small. The assessee was apparently unable to establish that after the trial run, commercial production of clinker was initiated within reasonable time. According to the Assessing Officer, trial runs continued till October, 1997 before a reasonable quantity of cement was produced.
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