- (1.) This appeal under Section 260A of the Income-tax Act, 1961 is at the instance of the Revenue and is directed against the order dated 26th June, 2000, passed by the Income-tax Appellate Tribunal, 'E' Bench, Calcutta, in ITA No.2637/Cal/1995, for the Assessment Year 1992-93 thereby setting aside the order of the CIT (Appeals) and granting the benefit of depreciation in favour of the assessee under Section 32 of the Income-tax Act.
(2.) Being dissatisfied, the Revenue has come up with the present appeal. At the time of admission of the present appeal, a Division Bench of this Court admitted this appeal on the following question of law: 'Whether on the facts and in the circumstances of the case, and in law, the I.T.A.T. erred in granting depreciation in respect of the factory in which no operation was carried out during the relevant previous year?
(3.) The facts giving rise to filing of the present appeal may be summed up thus: a) The assessee started its business in the State of Jammu and Kashmir from 1st January, 1988 and worked up to 31st March, 1990. However, due to serious deterioration of the law and order situation in the valley, it had to suspend its establishment during the assessment year as would appear from the Director's report for the year ending on 31st March, 1992, which is quoted below: 'The operations at Srinagar Plant continue to be suspended owing to the adverse law and order situation prevailing in Kashmir. At present there is no sign of normalcy being restored. The imported raw materials lying at Bombay, valued at Rs.63.91 lacs were sold on no profit basis, as per the guidelines of DGTD. The Company has been in contact with the authorities to explore the possibilities of resuming operations but at present there are no concrete indications as to when this may be possible." b) The assessee filed its return on 30th December, 1992 showing loss for the year at Rs.88,93,265/-. In response to a notice under Section 143(2) of the Act, the assessee appeared. The assessee claimed depreciation in the computation of income to the extent of Rs.42,99,917/-. The Assessing Officer disallowed such depreciation on the ground that as the operation of the factory remained suspended during the year, the assessee was not entitled to claim depreciation. Being dissatisfied, the assessee preferred an appeal before the CIT (Appeals). The CIT (Appeals), however, affirmed the order of the Assessing Officer disallowing the claim of depreciation on machinery and plant.;