ADARSH KUMAR GOEL, J. - (1.) SINCE Registry has not been able to send the file on account of fire in the Court premises, learned counsel for the Revenue has furnished copy of paperbook which is taken on record. We proceed to decide the matter after hearing learned counsel for the parties.
(2.) THIS appeal has been preferred by the Revenue under S. 260A of the IT Act, 1961 ("the Act") against order dt. 3rd Oct., 2007 passed by the Tribunal, Chandigarh Bench 'A', Chandigarh in ITA No. 20/Chd/2007, for the asst. yr. 1995-96, claiming following substantial questions of law : "(i) Whether on the facts and circumstances of the case, the learned Tribunal was right in law in allowing the depreciation on the new plant and machinery which was not put to use during the year under consideration ? (ii) Whether on the facts and circumstances of the case, the order passed by learned Tribunal is perverse as the evidence available on record has not been considered by the Tribunal ? (iii) Whether the learned Tribunal is right in law in allowing depreciation despite the fact that the assessee failed to fulfill the conditions contained in S. 32 of the IT Act, 1961 ?" The assessee is a co-operative society and claimed depreciation on the machinery which was not actually used but was kept ready for use. The AO did not allow the claim for depreciation on the ground that machinery had not been actually put to use. On appeal, the CIT(A) upheld the order of the AO but the Tribunal accepted the plea of the assessee as follows : "With respect to balance, we find that plea of the assessee all alone has been that the plant and machinery has been kept ready for production and in fact trial run was carried out on 28th March, 2005 onwards. In support, apart from other evidences, the assessee produced a log-book which showed hour to hour working of the machinery and such log-books were maintained by the assessee regularly for old plant and machinery as well as the new plant and machinery installed. We find that the statements made by the chief engineer of the assessee were on the basis of such records. On the strength of such evidence, the assessee had argued that it being an entity, which is headed by Government official as its managing director, there were no reasons to doubt the bona fides of the claim. In this connection we find that the CIT(A) has found discrepancies in the log-books produced by the assessee. According to the CIT(A) the log-book related to new boiler and turbine etc. 'had nothing relating to production from the expanded plant is produced/filed.' According to the CIT(A), the running of boilers and turbines cannot be taken as an evidence relating to readiness of the plant and machinery for the purpose of production. We have considered the entire gamut of facts and find that the inference drawn by the CIT(A) is misplaced. Firstly, the excise records produced by the assessee duly show an enhanced crushing/production of molasses from the date when the assessee claimed to have put the new plant and machinery into operation i.e., from 28th March, 1995 onwards. This is evident from the copy of the excise register placed at p. 11 of the paper book. Apart from the aforesaid, as a circumstantial evidence, we find that the assessee has taken credit for the purchase of new plant and machinery in the excise record and availed modvat credit for the same. The entry of such credit made in excise records namely RG-23 is evident from the copies placed at pp. 7 to 10 of the paper book. After considering the aforesaid in the face of other material, we are inclined to uphold the plea of the assessee that the plant and machinery in question was at least in the state of readiness for production and therefore, it could be said to have been put to use for the purposes of S. 32 of the Act. As a matter of passing, we may mention here that the trial production also cannot be effected unless the plant is ready to be put to use and this position was not disputed by the AO even in the original proceedings."
(3.) WE have heard learned counsel for the parties.;