JUDGMENT
1. Revenue is before us, Assessee filed a return of income for the assessment year 1989-90 relevant for the previous year ending 31.3.1989 declaring a loss of Rs. 35,35,600/-. The Deputy Commissioner of Income Tax noticed that depreciation has been claimed by the respondent-assessee on several machineries. He directed the asses nee to furnish the copy of the invoices of the machinery on which depreciation was claimed. From verification, it was found that the items of machinery had been purchased during the year. However, since on the admission of the respondent-assesses itself that the hospital started functioning from February/March 1989, the assessee was directed to produce evidence regarding use of machinery, No evidence was produced by the assessee. In those circumstances; the assessing authority concluded that the items of machinery on which depreciation was claimed were not put to use by the hospital and consequently he disallowed the depreciation on the imported machinery to the extent of Rs. 17,70,5697- and on Indian machinery to the extent of Rs. 4,25,525/- aggregating to Rs. 21,96,094/- and an assessment order was passed to that effect. An appeal was filed before the Appellate Commissioner. The Appellate Commissioner directed the assessing authority to allow the further depreciation of a sum of Rs. 21,96/094/- over and above what had been allowed by the assessing authority. The revenue being aggrieved by the appellate order assessee moved the Tribunal, The Tribunal upheld the claim of the assessee holding that when it is accepted that the machineries are kept ready for use, then in the light of the case laws relied on by the appellate Commissioner, the respondent is entitled for depreciation. It is in these circumstances, the revenue is before us.
2. The following questions of law are framed for our consideration:
a) Whether, on the facts and the circumstances of the case, the Tribunal is correct in law in holding that the respondent-assessee is entitled to claim depreciation allowance in relation to the assessment year 1989-90 as the machineries were ready for use?
b) Whether, on the facts and circumstancer of the case, the Tribunal is correct in law in holding that the respondent-assessee is entitled for the claim of depreciation when the machineries are kept ready for use and although not used during the relevant accounting year?
3. Matter is heard fairly for a long time. Sri. Indra Kumar, learned Counsel takes us to Section 32 of the Indian Income Tax Act to contend that in the case on hand, the benefit of depreciation is not available in terms of the material placed on record. Both the learned Counsel have relied on various Judgments.
4. After hearing, we have carefully perused the material placed on record.
5. The only question that requires our consideration is as to whether the assesses is entitled for benefit of depreciation in terms of Section 32 of the Indian Income Tax Act. The assessing officer noticed that the firm did not produce any evidence in respect of claim of depreciation. The assessing officer notices that the firm did not produce copies of prescriptions produced by the professionals. It also noticed that no prescription slips were made available to indicate that there was no recommendation to use these imported items of machinery or indigenous machinery which are under dispute for claim of depreciation. When the same was challenged before the appellate authority, the appellate authority notices that the machinery was kept ready for use but could not be used and that therefore the appellant is entitled for depreciation in terms of his order. He allowed the appeal in part. When the same was challenged by the Deputy Commissioner before the Tribunal, the Tribunal on the ground of keeping the machinery ready for use has chosen to grant the entire benefits. Let us see as to whether the grant of depreciation benefits is permissible on the facts of this case.
6. Section 32 of the Indian Income Tax Act would provide for depreciation. The said Section would show that deduction on depreciation is permissible in the event of machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession. The said wordings used have been considered by the Courts of law.
7. The assessee strongly relies on various case laws in support of his submissions.
2005(10) SCC 275 (BPL Display Devices Ltd. v. Commissioner of Central Excise) is a case that arose under Customs Act. In the said case, the wordings used were ‘for use’. The Supreme Court notices the meaning of ‘for use’ in its Judgment. The Supreme Court ruled that no material distinction can be drawn between the loss on account of leakage and loss on account of damage, The words ‘for use’ used in similar exemption notifications have also been construed by this Court earlier in the State of Haryana v. Dalmia Dadri Cement Ltd., to mean ‘intended for use’ . The said Judgment is not available since the word used in the case on hand ‘for use’ stands on a different footing than ‘use’ in terms of the Statute.
8. (Multican Builders Ltd. v. Commissioner of Income Tax) is a Judgment of the Calcutta High Court. In the said. case, the Court was considering the leasing of the vehicle for the purpose of depreciation by the Court. That Judgment also stands on distinguishable facts.
9. 254 ITR 488 (Commissioner of Income-Tax v. Union Carbide (I) Ltd.,) is again a Judgment of the Calcutta High Court. In the said case, the Court went into the question as to whether the trial production could be termed as ‘used for the purposes of Section 32 of the Act.’ That Judgment also is not available to the assesses in the case on hand, That was a case in which the Court considered the question as to whether the machinery kept ready for use can be given the benefit of depreciation. In that case, it is seen that the Revenue conceded that ‘ready for use’ would mean passing user of the asset. It was in the light of no contest.
10. In (Jagatram Ahuja v. Commissioner of Gift-Tax) is a Judgment of the Supreme Court. The Supreme Court notices the object of Gift-tax Act visa-vis Estate Duty Act.
The Supreme Court ruled that ‘the words and expressions defined in one statute as judicially interpreted do not afford a guide to the construction of the same words or expressions in another statute unless both the statutes are pari materia Statute.’
11. 1990(183) ITR 2 (Keshavji Ravji and Co. v. Commissioner of Income-Tax) is again a Judgment of the Supreme Court in which the Court says that the Court could not resort to the go called ‘equitable construction’ of a taxing statute is not to say that, where a strict literal construction leads to a result not intended to sub-serve the object of the legislation, another construction, permissible in the context, should not be adopted.
12. Commissioner of Sales Tax v. Jaswant Singh Charan Singh in 1967 (19) STC 469 is also a Judgment of the Supreme Court in which the Supreme Court has said that while interpreting items in Statutes like the Sales Tax Acts, resort should be had not to the scientific or technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense. There cannot be any quarrel over these well accepted principles of law. The question is as to whether the ready for use is used in terms of Section 32.
13. (Director of Entry Tax v. Mahindra and Mahindra) was a case with regard to refund of entry tax. The Court notices that this is not a case where a machine had only been displayed. In other words, the machine was started up and its working was shown. It was, therefore, used and it is of no consequence that the use was not for the purpose for which it was made. On facts, the Court ruled that the said machine was used. None of the case laws cited by the assesses is of any help to the assesee in the given situation. On the other hand, there are direct Judgments available in favour of the revenue.
14. (The Federation of Andhra Pradesh Chambers of Commerce and Industry v. State of Andhra Pradesh and Ors. It is a case that arose from Andhra Pradesh, The Supreme Court was considering levy of assessment in terms of A.P. Non-Agricultural lands Assessment Act. Section 3 uses the word ‘used’ for the purpose of levy of tax, The Supreme Court noticed in para 4 the Judgment of the Full Bench of the Andhra Pradesh High Court in which the Full Bench ruled that it is enough if the land is kept for use for a purpose connected with industrial or commercial undertaking. After noticing, the Supreme Court notices the Judgment of the English Court in the case of 1921(1) KB 64. The Court noticed as under:
In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax.
There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used.
The Court also noticed the Judgment of the Supreme Court in The Controller of Estate Duty, Gujarat v. Shri Kantilal Trikamlal , Thereafter, in para 9, the Court ruled as under:
We are in no doubt whatever, therefore, that it is only land which is actually in use for an industrial purpose as defined in the said Act that can be assessed to non-agricultural assessment at the rate specified for land used for industrial purposes. The wider meaning given to the word ‘used’ in the Judgment under challenge is untenable. Having regard to the fact that the said Act is a taxing statute, no Court is justified in imputing to the Legislature an intention that it has not clearly expressed in the language it has employed.
15. From these Judgments, what is clear to us is that for the purpose of depreciation, machinery has to be actually used in terms of the Statute. A kept ready theory is not available in the light of the Apex Court rulings.
16. After noticing these Judgments, the Madhya Pradesh High Court has ruled that the basic concept underlying the allowance of depreciation is that it should result, as consequence of the machinery being actually used or employed in the earning of income.
17. The Calcutta High Court in (Commissioner of Income-Tax v. Oriental Coal Co. Ltd.) also noticed the Liquidators of Pursa Ltd. v. CIT and thereafter it ruled that under Sub-section 1 of Section 32 there should be actual user of plant and machinery for the purposes of business.
18. The Bombay High Court has ruled that the word ‘used’ in Section 32 of the Income-tax Act, 1961, denotes that the asset has been actually used and not that it is merely ready for use. The expression ‘used’ means actually used for the purposes of the business, A Special Leave Petition filed against the said Judgment stood dismissed . We are in agreement with the views expressed by the Bombay, Calcutta and Madhya Pradesh High Courts. In the light of these Judgments directly available on record, we are of the view that the kept ready theory is not available to the assessee for the purpose of claiming depreciation when the Legislature has chosen to use the word ‘used’ we have to give a full meaning to it and avoid reading something not intended by the Legislation. Afterall, these benefits are provided for certain purposes. That purpose is used in terms of the Statute. If the machinery is not used, Section 32 is not applicable and hence, the assessee cannot have any benefits, if granted would result in reading something which is not provided in the Statute in terms of Section 32.
19. In the result, we accept the contention of Sri. Indra Kumar, learned Counsel and accept this appeal. In the result, the following order is passed:
Appeal is accepted. Questions of law are answered in favour of the (sic).