Balzers Vaccum Coating Bak 600 machine V. Income-tax Department

RC/153/1996

AI Insights

The case revolves around the assessee's claim for 100% depreciation on a machine named 'Balzers Vaccum Coating Bak 600' for the assessment year 1987-88. The Assessing Officer initially disallowed the claim, stating the machine was not installed and used within the relevant financial year. The First Appellate Authority and the Tribunal upheld this decision after examining the evidence, which included the machine's arrival date and installation claims. The Tribunal found no evidence that the machine was used or that trial runs were conducted before the end of the previous year. The High Court, referencing the Tribunal's findings and the absence of any material evidence to the contrary, dismissed the case.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 796145 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 10-06-2014
• Assessment Year: misc
• Laws Referred To: Income-tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Assessment Year 1987-88; Business use; Depreciation; Trial run; Balzers Vaccum Coating Bak 600 machine
• Section: 32

Judgement Text

"HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM REFERRED CASE No.153 OF 1996 ORDER:- (per Hon’ble Sri Justice Challa Kodanda Ram) At the instance of the assessee, the following three questions of law are arising from the order of the Tribunal dated 08.03.1996 for the assessment year 1987-88, are referred for the opinion of this Court: 1. “Whether on the facts and in the circumstances of the case, could it be said that the appellant has used Balzers Vaccum Coating Bak 600 machine for the purpose of business as understood under Section 32 of the Income-tax Act and the same while computing the income for the assessment year 1987-88?” 2. “Whether on the facts and circumstances of the case, Balzers Vaccum Coating Bak 600 machine installed and commissioned by way of trial runs and process development before 31.3.1987 could be said to have been used by the assessee for the purpose of business as understood u/s.32 of the Income-tax Act?” 3. “Whether on the facts and circumstances of the case, the appellant is entitled to allowance of depreciation of Rs.49,75,808/- on Balzers Vaccum Coating Bak 600 machine while computing its income for the assessment year 1987-88?” 2) The assessee is an industry involved in manufacturing and supplying of certain critical optical equipment to the Defense Sector. For the assessment year 1987-88, the assessee claimed 100% depreciation on the equipment under the name “Balzars Vaccum Coating Bak 600 machine”. The claim for the depreciation was disallowed by the Assessing Officer alleging that the machine came to the factory of the assessee only on 29.03.1987 and in that view of the matter, the claim of the assessee that the machine was installed on 30.03.1987 and thereafter it was put to use was false. On further appeal, the First Appellate Authority Commissioner, as a matter of fact, found that the machine was infact reached the factory of the assessee on 29.03.1987. However, on scrutiny of the evidence on record including the additional evidence that was brought before him, he found that the claim of the assessee with regard to installation of the machinery and conducting of trial run was not supported by evidence, was false. The Tribunal had considered the entire evidence on record and on appreciation of the same was in complete agreement with the findings recorded by the Commissioner. The first appellate authority while recording a finding that the machine reached Hyderabad and factor on 29.03.1987 declined to allow the claim for depreciation on the ground that the same was not installed and put to use. The Tribunal confirmed the said findings and thereby refused to grant relief of depreciation as claimed by the assessee. In the above set of facts situation, the questions of law referred to in para No.1 are required to be answered by this Court. 3. At the out set, a careful perusal of the questions referred to above would go to show that there is no question raised before us on the ground of perversity of finding of facts by the Tribunal. In those circumstances and in line with the settled principles of law as set out by the Supreme Court that the findings recorded by the Tribunal can be the basis for the High Court while answering the questions of law referred. 4. Keeping in view of the settled legal principles, now we may refer to the findings recorded by the Tribunal in Para No.19 of page No.24: “19. We have heard the parties and considered the rival submissions. Throughout the proceedings before the assessing officer, the Commissioner (Appeals) and even before us, the assessee emphasized that there was installation before 31.3.1987. Nothing has been brought on record to suggest that the machinery was actually used or there was in fact trial conducted by the assessee before the end of the previous year. Even in answers to observations of the Commissioner (Appeals) in para No.25, the assessee’s reply is not that they had produced something on trial basis but on the aspect that Commissioner (Appeals) had accepted that there was at least some temporary installation. We have put it to the counsel of the assessee at the time of hearing to produce any contemporary evidence for the production or user of the equipment if any, of the machine but nothing was brought on record. On this ground alone, the assessee’s claim for depreciation can be disallowed as the language of Section 32 is clear in this regard. It allows deduction of depreciation only in respect of that machinery or plant which is used by the assessee for the purpose of its business in the previous year. Mere installation, if any, would not be sufficient to grant deduction under Section 32. Also in the present case, the machinery was not even fit or ready for use. The assessee’s contention that the machinery was used for trial run and therefore, it used for the purpose of business has no force. Firstly it has not been proved by any material on record that some trial run was at all carried by the assessee and accordingly we do not think that there could not all be a trial run. The concept of trial run is not defined in the Act. ‘Trial run’ as understood in business parlance is a stage prior to actual use of the machineries for producing any thing or article. In other words, the machine is ready to be used for the purpose of business. When it gives a successful trial run, it serves as a certificate that the machinery was ready to put to use. The theory of trial run cannot be fitted in mere inspection of machinery and checking the fact that the machinery was in good working condition. It is a stage after the machinery is installed and commissioned and prior to its user for actual production.” 5. In the light of categorical finding recorded by the Tribunal and there being no contra material to take a different view, the questions of law referred to this Court are required to be answered in the negative i.e., against the assessee and in favour of the revenue. 6. Accordingly, the referred case is dismissed. No order as to costs. Miscellaneous Petitions, if any, pending in this referred case shall stand closed. ___________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date:10.06.2014. Gk HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM REFERRED CASE No.153 OF 1996 Date:10.06.2014. Gk "