P.Krishna, J. - (1.) The Income-tax Appellate Tribunal, Delhi, at the instance of the Income-tax Department has referred the following question of law under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court :- "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in allowing the claim of depreciation of Rs. 1,91,917 on the plant and machinery of vegetable ghee unit as these were not actually used for the full year relevant to the assessment year 1977-78 ?"
(2.) The assessee is a limited company running a sugar factory, distillery, confectionery and vanaspati units. It did not operate the plant during the accounting year relevant to the assessment year 1977-78. But it claimed depreciation on plant and machinery on vegetable ghee unit. The claim was rejected by the Income-tax Officer to the extent of Rs. 1,91,917 as the plant and machinery was not actually used for the full year in respect of the vegetable ghee unit. In appeal this part of the order was set aside by the Commissioner of Income-tax (Appeals). The Tribunal has confirmed the order of the Commissioner of Income-tax (Appeals) on this point.
(3.) Heard learned counsel for the Department and Shri Vikram Gulati for the assessee-respondent. It was submitted by learned standing counsel that the Tribunal was not justified in allowing the normal depreciation at Rs. 1,91,917 on the plant and machinery which was not actually used during the year. Elaborating the argument it was submitted that for claiming depreciation the asset must be used during the whole or at least some part of the accounting year. The machinery and plant was not used at all in the previous year relevant to the assessment year in question and as such no depreciation under Section 32 of the Act could be allowed. We find no merit in the aforesaid submissions. The findings recorded by the Tribunal are that the vanaspati unit though was not actually in use but it was kept ready for use. There was no intention on the part of the assessee in the relevant assessment year to close the business of the vegetable ghee unit. The directors were making efforts to restart the vegetable ghee factory as soon as possible. There was no intention to close the said unit but on account of adverse circumstances, the said unit remained suspended and could not be operated in the year in question. The unit resumed production in the subsequent assessment year i.e., in July, 1978.;