SATISH KUMAR MITTAL, J. - (1.) THE assessee has filed this appeal under s. 260A of the IT Act, 1961 (hereinafter referred to as 'the Act'), against the to as 'the Tribunal'), in ITA No. 343/Asr/2004 for the asst. yr. 2000 -01, whereby the appeal of the Revenue has been partly allowed.
(2.) THE facts of the case are that the assessee is engaged in the business of manufacturing glue flakes from bone sinews Rs. 99,19,480, by making various additions. The issue before us pertains to disallowance of depreciation amounting to Rs. 1,76,254, out of the depreciation of Rs. 2,59,198, as claimed by the assessee on account of use of boiler. The AO disallowed the depreciation, while recording a finding that the said boiler was also used by M/s Protinkem and M/s P.B.M. Gelatine (P) Ltd., Jalandhar, the sister -concerns of the assessee. The AO, while working out the percentage of the work of production of Glue/TG, done by the sister -concerns of the assessee, at 68 per cent, also observed that on account of use of boiler, the assessee had shared expenses with its sister -concerns, for use of fuel, power and generator set.
(3.) ON appeal, filed by the assessee, the Commissioner of Income -tax (Appeals) [(hereinafter referred to as 'the CIT(A)] deleted the said addition, while observing that the boiler was actually owned by the assessee and was used by him for business purposes. It was further observed that if the surplus steam was sold to another concern, that could not be taken as a ground for holding that the assessee had not used the boiler for business purposes. Rather, it was added in the income of the assessee without any extra expenditure incurred by it. Aggrieved against the aforesaid order passed by the CIT(A), the Revenue filed appeal before the Tribunal. On the said issue, the appeal was allowed and order of the CIT(A) was set aside, observing as under : "In this regard, it is seen that the issue of supply of surplus steam was not before the AO. The AO has made the disallowance in accordance with the provisions of s. 38(2) of the Act. As per this section, wherein any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions inter alia, under s. 32(1)(ii) shall be restricted to a fair proportionate part thereof, which the AO may determine having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession. The learned CIT(A), is seen, is rather gone at a tangent form the findings arrived at by the AO. The issue of disallowance under s. 38 (2) of the Act has not at all been able to repel the findings arrived at by the AO. The case is directly covered by the provisions of s. 38(2). Therefore, we hereby uphold the findings of the AO.";