ACIT, New Delhi V. M/s. Mitsui Prime Advance Composites India Pvt. Ltd., New Delhi

ITA 4597/DEL/2013

• Counselvise Citation: 459720114 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: VIKAS BANSAL
• Keywords: Depreciation; Business expenditure; Revenue expenditure
• Section: 143(3); 32

Judgement Text

ITA NO.4597/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 4597 /DEL/2013 A.Y. 200 9 - 10 ACIT, CIRCLE 6(1), NEW DELHI ROOM NO. 413, C.R. BLDG., I.P. ESTATE, NEW DELHI VS. M/S MITSUI PRIME ADVANCED COMPOSITES INDIA PVT. LTD., 3 RD FLOOR, SOUTHERN PARK BUILDING, D-2, SAKET DISTRICT CENTREL, SAKET, NEW DELHI 110 017 (PAN:AAFCM1458C) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. P. DAM KANUNJNA, SR. DR ASSESSEE BY : S HRI K.M. GUPTA, ADV. & SH. VIKAS BANSAL, A.R. DATE OF HEARING : 16-11-2015 DATE OF ORDER : 23-11-2015 ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE ORDE R DATED 09.5.2013 PASSED BY THE LD. CIT(A)-IX, NEW DELHI R ELEVANT FOR THE ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL READ AS UNDER:- THE DCIT/ACIT CIRCLE-6(1), NEW DELHI IS HEREBY DIRE CTED TO FILE AN APPEAL IN THE ABOVE MENTIONED CASE BEFORE T HE ITA NO.4597/DEL/2013 2 INCOME TAX APPELLATE TRIBUNAL, NEW DELHI ON THE FOL LOWING GROUND (S) OFAPPEAL.- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF 50% OF SALARY EXPENSES AMOUNTING TO RS. 67,67,156/- ON THE GROUND THAT ONCE THE BUSINESS WAS SET UP ALL RELATED EXPENDITURE WILL HAVE TO BE ALLOWED COMPLETELY IGNORING THE FACT, MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE SERVIC ES OF THE THREE EMPLOYEES WERE UTILIZED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADING AS THE MANUFACTURING ACTIVITY WAS YET TO START. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) DELETED THE ABOVE DISALLOWANCE OF 5 0% OF DEPRECIATION OF OFFICE EQUIPMENTS AMOUNTING TO R S. 12,81,810/- ON THE GROUND THAT THERE CANNOT BE ANY PARTIAL DISALLOWANCE OF DEPRECIATION ONCE THE ASSET IS PUT TO USE, COMPLETELY IGNORING THE FACT, MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE ABOVE ASSETS WERE USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADING AS THE MANUFACTURING ACTIVITY WA S YET TO START. 3. THAT THE ORDER OF THE LD. CIT (A) IS ERRONEOUS A ND IS NOT TENABLE ON FACTS AND IN LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. ITA NO.4597/DEL/2013 3 (I) THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR FORGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS ENGAGED IN THE BUSINESS OF TRADING POLYPROPYLENE CO MPOUND USED IN THE AUTOMOTIVE INDUSTRY. THE ASSESSEE COMPANY START ED ITS TRADING OPERATIONS IN FY 2008-09 (AY 2009-10) WHILE THE COM MERCIAL PRODUCTION WAS STARTED ON JUNE 15, 2009 (I.E. FY 20 09-10). 3.1 FOR THE YEAR UNDER CONSDIERATION, THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME U/S. 139(1) OF THE ACT ON SEPTEMBE R 30, 2009 DECLARING A BUSINESS LOSS OF RS. 12,29,71,472/-. T HE ASSESSEE SUO MOTTO REVISED ITS RETURN OF INCOME ON 22.3.2010 DE CLARING A BUSINESS LOSS OF RS. 1,24,87,861/- BY DISALLOWING EXPENSES O N SETTING UP OF MANUFACTURING PROCESS CLAIMED IN THE ORIGINAL TAX R ETURN. THE ASSESSMENT WAS COMPELTED UNDER SECTION 143(3) OF TH E ACT BY THE AO VIDE ORDER DATED 5.12.2011 AND ASSESSED THE TOTAL L OSS OF THE ASSESSEE AT RS. 44,38,895/- U/S. 143(3) OF THE ACT AS AGAINS T THE RETURNED LOSS OF THE RS. 1,24,87,861/- BY MAKING THE FOLLOWING AD HOC DISALLOWANCES: A) 50% OF PERSONNEL EXPENSES AMOUNTING TO INR 67, 67,156; AND B) 50% OF DEPRECIATION EXPENSE AMOUTING TO INR 12, 81,810/-. 4. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER 09.5.2013 BY DELETI NG THE ADDITIONS IN DISPUTE PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. 5. AGGRIEVED WITH THE AFORESAID ORDER DATED 09.5.20 13, REVENUE IS IN APPEAL BEFORE US. ITA NO.4597/DEL/2013 4 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 7. ON THE CONTRARY, ASSESSEE HERSELF RELIED UPON TH E ORDER OF THE LD. CIT(A) AND REQUESTED THAT THE SAME MAY BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE ORDER OF THE REVENUE AUTHORITIES. I FIND THAT THE LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED THE I SSUES IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ADJUDICATED THE ISSUE NO. 1 VIDE PARA NO. 5 TO 5.6 AT PAGES 3 TO 7 OF THE IMPUGEND ORDER WHICH ARE REPRODUCED HEREUNDER:- 5. GROUND RELATING TO DISALLOWANCE OF PERSONNEL EX PENDITURE OF RS. 67,67,156/-. THE APPELLANT HAD INCURRED PERSONNEL EXPENDITURE ON SALARIES ON THREE OF ITS EMPLOYEES AS UNDER:- S.NO. NAME DESIGNATION AMOUNT RS. (SALARIES) 1 YASUO WATANABE GENERAL MANAGER- SALES & MARKETING 1,27,81,456/- 2 ROOPESH SAXENA EXECUTIVE SALES & MARKETING 1,34,317/- 3 ARUN MISHRA MANAGER- SALES & MARKETING 6,18,538/- TOTAL 1,35,34,312 5.1 THE APPELLANT HAS DECLARED SALES OF RS.1975835 9/- AGAINST PURCHASES OF RS.20465302/- , ALL RELATED TO THE AUT OMOTIVE INDUSTRY. 5.2 THE ASSESSING OFFICER HAS HELD THAT THE EXPENDI TURE RELATED TO SALAR.IES OF THE PERSONNEL STATED ABOVE SHOULD BE D ISALLOWED 50% ON AD- HOC BASIS AS THE MANUFACTURING ACTIVITY OF THE COMP ANY HAS NOT YET ITA NO.4597/DEL/2013 5 STARTED, THE SALES PERSONNEL ARE ONLY DEALING WITH TRADED ITEMS AND NOT THEIR OWN MANUFACTURED ITEMS. HE HELD THAT THE 'ASS ESSEE FAILED TO SUBSTANTIATE THAT THEY WERE EXCLUSIVELY ENGAGED FOR THE PURCHASE OF GOODS AND SALES THEREOF........... FOR MERELY A SHORT PER IOD OF TRADING ACTIVITI1S WHICH TOOK PLACE MORE OR LESS WITH THE SINGLE PARTY EVEN BELOW THE PURCHASE PRICE, THE ASSESSEE CLAIMED ENTIRE PERSONN EL EXPENDITURE IN RESPECT OF ABOVE MENTIONED PERSONNEL AGAINST TRADI NG ACTIVITIES AS REVENUE EXPENDITURE ASSESSEE COMPANY FAILED TO SUBS TANTIATE THE CLAIMED EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR T HE TRADING ACTIVITIES' 5.3 THE APPELLANT HAS CONTENDED 'THAT THE PRIMARY R OLE OF THE ABOVE MENTIONED PERSONNEL WAS TO DEVELOP THE MARKET OF CO MPANY'S PRODUCTS IN INDIA. IT IS CLEAR FROM THE PROFILE OF THE EMPLOYEE S INCLUDING EXPATRIATE MR. YASUO WATANABE, THAT THE EMPLOYEES ARE SPECIALL Y ENGAGED FOR SALES ACTIVITY OF THE APPELLANT COMPANY. IT IS IMPORTANT TO MENTION THAT THE PRODUCTS TRADED BY THE APPELLANT COMPANY ARE NOT DI FFERENT FROM THE PRODUCTS WHICH ARE TO BE MANUFACTURED AND SOLD. THE SALES ACTIVITY IS ONE COMPOSITE ACTIVITY IRRESPECTIVE OF WHETHER THE GOOD S ARE MANUFACTURED OR TRADED. THE APPELLANT COMPANY HAS PURCHASED GOODS DURING TH E YEAR AND SOLD TO HONDA TRADING CORPORATION PVT. LTD. AND TOYOTA GOSE I INDIA PVT. LTD., LEADING AUTOMOTIVE COMPANIES IN INDIA USING THE SER VICES OF ITS SALES AND MARKETING PERSONNEL. WHAT IS IMPORTANT IS THAT WHETHER AN ACTIVITY, IN T HE LIST OF ACTIVITIES WHICH CULMINATE INTO SET UP OF BUSINESS, HAS BEEN INITIAT ED. IN THE APPELLANT'S CASE, THE TRADING ACTIVITIES, WHICH IS ONE OF THE MAIN BUSINESS ACTIVITY, AS ALSO STATED IN THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT WERE CARRIED OUT IN A. Y. 2009-10 HENCE, SALARY EXPENSES INCURRED, BEING A ITA NO.4597/DEL/2013 6 NORMAL BUSINESS EXPENDITURE SHOULD BE ALLOWED AS DE DUCTION IN ENTIRETY.' 5.4 THE FACTS OF THE CASE WERE CONSIDERED. IT IS NO T DISPUTED THAT TRADING ACTIVITY WAS INCURRED BY THE APPELLANT WITH THE HEL P OF THE PERSONNEL MENTIONED ABOVE. IT IS ACCEPTED THAT THESE PERSONS WERE ENGAGED FOR THE SALES ACTIVITY OF THE APPELLANT COMPANY. IT IS TRUE THAT IN THIS YEAR MANUFACTURING HAD NOT COMMENCED. IT IS NOT NECESSAR Y FOR THE SALES TEAM TO EFFECT SALES ONLY OF ITS OWN MANUFACTURED GOODS. AS STATED, DEVELOPING THE MARKET FOR THE PRODUCTS IS ALSO ITS CORE ACTIVI TY. THESE PERSONNEL HAVE DEVOTED THEIR ENERGIES FOR THE JOBS ASSIGNED TO THE M BY THE APPELLANT COMPANY, AND THAT TO SUCCESSFULLY. THE AD-HOC DISAL LOWANCE DOES NOT HOLD ANY MERIT ONCE IT IS CLEAR THAT THE PERSONNEL HAVE CARRIED OUT ACTIVITIES FOR THE APPELLANT. IT IS NOT RELEVANT WH ETHER THE MANUFACTURING ACTIVITY HAS STARTED OR NOT ONCE IT IS ESTABLISHED THAT THE TRADING ACTIVITY HAS BEEN STARTED AND THE BUSINESS HAS BEEN 'SET UP' FOR THE PURPOSE OF SECTION 3. 5.5.1 IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. PIEM HOTEL PVT. LTD. (BOMBAY HIGH COURT), [1994] 209 ITR 0616, IT WAS OB SERVED: 'IT FOLLOWS, THEREFORE, THAT THE UNIT MUST BE READY TO START FUNCTIONING FOR THE PURPOSE FOR WHICH IT IS BEING S ET UP. IF THE UNIT IS READY TO START FUNCTIONING, IT DOES NOT MATTER THAT IT HAS NOT ACTUALLY STARTED ITS BUSINESS ON THE RELEVANT DATE. ONCE THE BUSINESS IS SET UP, EXPENDITURE INCURRED CONCERNING SUCH BUSINESS C AN BE CLAIMED AS BUSINESS EXPENDITURE SUBJECT TO OTHER A LICABLE CONDITIONS OF THE ACT BEING SATISFIED.' 5.5.2 THE JURISDICTIONAL DELHI HIGH COURT DISCUSSED THE ISSUE OF 'COMMENCEMENT OF BUSINESS' AND 'SETTING UP OF BUSIN ESS' IN THE CASE OF ITA NO.4597/DEL/2013 7 COMMISSIONER OF INCOME-TAX V. L. G. ELECTRONIC (IND IA) LTD. (2005) 199 CTR 205 (DEL). 'THE ONLY ISSUE THAT HAS BEEN RAISED IS WITH REGARD TO DEDUCTION FOR EXPENSES CLAIMED BY THE ASSESSEE WHICH WAS DISALLOW ED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AD NOT COMMENCED ITS BUSINESS DURING THE ASSESSMENT YEAR. THE CLAIM OF THE ASSESSEE PERTAINS TO EXPENSES INCURRED ON TRAVE LLING AND CONVEYANCE, RENT, TELEPHONE EXPENSES, BROKERAGE, MA INTENANCE AND SALES PROMOTION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE BUSI NESS OF THE ASSESSEE WOULD COMMENCE WITH THE FIRST PURCHASE OF STOCK-IN-TRADE AND SINCE NO TRADING ACTIVITIES HAD TAKEN PLACE, TH E ASSESSEE 'COULD NOT REQUEST FOR CAPITALIZATION OF THE EXPENSES INCU RRED. THE COMMISSIONER OF INCOME-TAX (APPEALS) NOTED THAT THE RE WAS A DISTINCTION BETWEEN COMMENCEMENT OF BUSINESS AND SE TTING UP OF BUSINESS AND THE TWO DATES NEED NOT NECESSARILY OVE RLAP. IT WAS HELD THAT SECTION 3 OF ACT REFERS TO THE DATE OF SE TTING UP THE BUSINESS AND AS SUCH IT IS ONLY THEREAFTER THAT THE PREVIOUS YEAR OF THE NEWLY SET UP BUSINESS WOULD COMMENCE. IT WAS HE LD THAT THE EXPENSES INCURRED PRIOR THERETO COULD BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF DETERMINING THE PROFITS OF A NEWLY SET UP BUSINESS. SECTION 3(1) OF THE ACT READS AS FOLLOWS: '3. 'PREVIOUS YEAR DEFINED.-(1) SAVE AS OTHERWISE P ROVIDED IN THIS SECTION, 'PREVIOUS YEAR FOR THE PURPOSES OF THIS AC T, MEANS THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR: PROVIDED THAT, IN THE CASE OF A BUSINESS OR PROFESS ION NEWLY SET UP, OR A SOURCE OF INCOME NEWLY COMING INTO EXI STENCE, IN THE ITA NO.4597/DEL/2013 8 SAID FINANCIAL YEAR, THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS OR PROF ESSION OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND ENDING WITH THE SAID FINANCIAL Y EAR ... ' THERE IS NO DOUBT THAT THE DATE OF SETTING UP A BUS INESS AND THE DATE OF ITS COMMENCEMENT COULD BE TWO SEPARATE DATES. SECTION 3(1) OF THE ACT, AS IT STOOD AT THE RELEVANT TIME ( AND EVEN AS IT STANDS TODAY) HAS REFERENCE TO THE DATE OF SETTING UP THE BUSINESS, THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TR IBUNAL MERELY RELIED ON THE EXPLICIT LANGUAGE OF THE SECTI ON TO COME TO THE CONCLUSION THAT THE VIEW OF THE ASSESSING OFFICER W AS INCORRECT. THIS BEING THE CLEAR POSITION, WE DO NOT FIND ANY I NFIRMITY IN THE IMPUGNED ORDER.' 5.5.3 THE SIMILAR VIEW HAS BEEN REITERATED IN THE F OLLOWING CASES:- COMMISSIONER OF INCOME-TAX V. FRANCO TOSI INGEGNERI A 241 ITR 368 (MAD) HOTEL ALANKAR VS. COMMISSIONER OF INCOME-TAX (GUJARAT HIGH COURT) [1982] 133 ITR 0866 5.6 IN VIEW OF THE JUDICIAL PRONOUNCEMENT GIVEN ABO VE AND THE FACTS OF THE CASE, ONCE IT IS ESTABLISHED THAT THE BUSINESS WAS SET UP ALL RELATED EXPENDITURES WILL HAVE TO BE ALLOWED AS DEDUCTION. GROUND OF APPEAL NO. 2 IS UPHELD. THE ADDITION OF RS.6767156/- IS DELETE D. 8.1 IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) , BECAUSE THE LD. CIT(A) HAS DECIDED THE ISSUE IN DISPUTE IN FAVOR OF THE AS SESSEE AFTER APPRECIATING THE EVIDENCE FILED BY THE ASSESSEE AS WELL AS VARIOUS D ECISIONS RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE DECISIO NS OF THE OTHER HIGH COURT DECISIONS. IN VIEW OF THE JUDICIAL PROUNCEMENTS GI VEN ABOVE, WE ARE OF THE VIEW ITA NO.4597/DEL/2013 9 THAT ONCE IT IS ESTABLISHED THAT THE BUSINESS WAS S ET UP ALL RELATED EXPENDITURES WILL HAVE TO BE ALLOWED AS DEDUCTION. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND HENCE, WE UPHOLD THE SAME BY DISMISSING THE APPEAL FILED BY THE REVENUE. 9. WITH REGARD TO GROUND NO. 3, RELATING TO ADDITIO N OF RS. 12,81,810/- BEING 50 % DEPRECIATION ON OFFICE EQU IPMENT ETC. IS CONCERNED, WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY HAS A LSO ELABORATELY DISCUSSED THE ISSUE IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ADJUDICATED THE ISSUE IN DISPUTE VIDE PARA NO. 6 TO 6.3 AT PAGES 7 TO 8 OF THE IMPUGEND ORDER WHICH AR E REPRODUCED HEREUNDER:- 6. THE THIRD GROUND OF APPEAL IS REGARDING DISALL OWANCE OF RS.12818101- BEING 50% DEPRECIATION ON OFFICE EQUIP MENT ETC.. THE AO HAS HELD THAT THE CONTENTION THAT ASSETS NAMELY OFFICE EQUIPMENTS, COMPUTERS FURNITURE AND FIXTURES WERE WHOLLY AND EXCLUSIVELY MEANT FOR THE TRADING A CTIVITIES IS WITHOUT ANY BASIS. 6.1 THE APPELLANT COMPANY HAS CONTENDED THAT IT HAD SET UP IT TRADING ACTIVITIES IN THE AY 2009-10. FOR THE PURPOSE OF U NDERTAKING TRADING ACTIVITIES IT HAD DEPLOYED THESE ASSETS IN THE OFFI CES. ACCORDINGLY, DEPRECIATION WAS CLAIMED ON THESE ASSETS WERE PUT T O USE AND DEPRECIATION CLAIM, THE TAX AUDIT REPORT HAS ALSO CERTIFIED THE SAME. ALL CONDITIONS OF SECTION 32 ARE MET. ITA NO.4597/DEL/2013 10 6.2 THE FACTS OF THE CASE WERE CONSIDERED, THE ACT CLEARLY STATES THAT DEPRECIATION SHALL BE ALLOWED IF THE ASSETS ARE 'PU T TO USE' DURING THE YEAR. JUST BECAUSE MANUFACTURING ACTIVITY HAS NOT C OMMENCED DOES NOT IMPLY THAT THE GOODS HAVE BEEN ONLY PARTIALLY BEEN PUT TO USE. AS SOON AS THEY WERE EMPLOYED IN THE OFFICE FOR TRADING PURPOS ES IT CAN BE SAID THAT THE ASSETS WERE PUT TO USE. IN SUCH CASE, COMPLETE DEPRECIATION SHALL HAVE TO BE ALLOWED. THE ACT DOES NOT ALLOW FOR PARTIAL D EPRECIATION BEING ALLOWED ONCE THE ASSETS HAS BEEN PUT TO USE. RELIANCE IS PLACED ON THE JUDGEMENT GIVEN IN THE FO LLOWING CASES:- THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF C IT V. NAKODA METALS [2006] 204 CTR (RAJ.) 514, EXAMINED THE FACT , WHETHER COMMERCIAL PRODUCT ION HAS COMMENCED IS OF RELEVANC E OR NOT. HELF NO, 'COMMENCEMENT OF COMMERCIAL PRODUCTION BY THE ASSES SEE DURING THE RELEVANT PREVIOUS YEAR IS NOT A CONDITION FOR ALLOW ING DEDUCTION AS INVESTMENT ALLOWANCE OR DEPRECIATION. WHAT IS NEEDE D IS THAT THE MACHINES MUST BE USED FOR THE ASSESSEE'S BUSINESS. WHETHER THE ASSESSEE IS ABLE TO SUCCESSFULLY COMMENCE COMMERCIAL PRODUCT ION OR COMMERCIAL PRODUCTION IS DELAYED ON ACCOUNT OF DEFECT IN TRIAL PRODUCTION DOES NOT AFFECT THE ALLOWABILITY OF DEDUCTION ON ACCOUNT OF DEPRECIATION AND INVESTMENT ALLOWANCE IF FROM THE MATERIAL ON RECORD , IT CAN REASONABLY BE ITA NO.4597/DEL/2013 11 INFERRED THAT MACHINES WERE USED FOR THE ASSESSEE'S BUSINESS DURING THE RELEVANT PREVIOUS YEAR. THE HON'BLE GUJARAT HC IN THE CASE OF ASSTT. CIT V. ASHIMA SYNTEX LTD. [2002] 122 TAXMAN 230/251 ITR 133, LAID THAT, MAGNITUDE OF PRODUCTION IS NOT DETERMINATIVE OF 'USE' - LAW DOES NOT REQUIRE THAT THERE MUST BE FPTIMUM PRODUCTION FOR GRANTING THE BENEFIT OF DEPRECIATION. 'LAW ONLY REQUIRES 'THAT THERE MUST BE USE OF PLANT AND MACHINERY FOR THE PURPOSE OF BUSINESS. USE OF SUCH WORDS THAT PLANT A ND MACHINERY WAS RUN MORE EXTENSIVELY OR WAS REQUIRED TO BE USED FOR LAR GER PRODUCTION' IS NOT TO BE FOUND IN THE ACT OR RULES. WHETHER THE PLANT AND MACHINERY IS USED TO THE EXTENT OF ITS EFFICIENCY IS IRRELEVANT FOR T HE PURPOSE OF ALLOWING DEPRECIATION. THE TEST IS THAT THE BUILDING, PLANT AND MACHINERY ARE USED FOR THE PURPOSE OF BUSINESS'. 6.3. IN VIEW OF TH ABOVE IT IS HELD THAT THERE CAN BE NO PARTIAL DISALLOWANCE OF DEPRECIATION, THE GROUND OF APPEAL NO. 3 IS UPHELD. THE ADDITION OF RS. 67,67,1561- IS DELETED. 9.1 IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) , BECAUSE THE LD. CIT(A) HAS DECIDED THE ISSUE IN DISPUTE IN FAVOR OF THE AS SESSEE AFTER APPRECIATING THE EVIDENCE FILED BY THE ASSESSEE AS WELL AS VARIOUS D ECISIONS RENDERED BY THE VARIOUS HONBLE HIGH COURT. IN VIEW OF THE JUDICI AL PROUNCEMENTS GIVEN ITA NO.4597/DEL/2013 12 ABOVE, WE ARE OF THE VIEW THAT THE ACT DOES NOT ALL OW FOR PARTIAL DEPRECIATION BEING ALLOWED ONCE THE ASSETSE HAS BEEN PUT TO USE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND THEREFORE, WE UPHOLD THE ACTION OF TH E LD. CIT(A) OF DELETING THE ADDITION IN DISPUTE AMOUNTING TO RS. 12,81,810/- (W RONGLY MENTIONED IN THE IMPUGEND ORDER AS RS. 67,67,156/-) AND DISMISS THE APPEAL FILED BY THE REVENUE. 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/11/2015. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 23/11/2015 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES