By TIOL News Service

NEW DELHI, MAY 04, 2016: THE issue is - Whether mere fact that a machinery operates on a lower level of load than its capacity, would justify the view that machine was not put to use for the purposes of claiming depreciation u/s 32. NO is the answer.

Facts of the case

The assessee during the concerned year had purchansed and set up a 2.2 MW Turbine Generator (TG) set for generation of captive power, and accordingly claimed depreciation at full rate of 80% of its cost of Rs.3.86 crores on the ground that the TG set had been put to use before 30th September, 2006. The AO however disallowed the claim for full depreciation at 80% on the ground that the minutes of the meeting between the representative of assessee and one M/s TEIL who erected the TG set, to conclude that the TG set was not put to use at full capacity before 30th September, 2006. Thus, the assessee was treated as not entitled to the benefit of the full depreciation at 80% but only at 40%, and this disallowance of 40% depreciation resulted in addition of Rs.1.54 crorres to the taxable income. On appeal, the Tribunal rendered a finding that the TG set had been 'put to use' on or before 30th September, 2006 and thus entitled to the benefit of depreciation at 80% as claimed by the assessee. This resulted in deletion of the disallowance of Rs 1.54 crores.

Having heard the parties, the High Court held that,

++ it is found that the impugned order of the Tribunal has on the basis of the minutes of the meeting, found that the TG set is running smoothly and satisfactorily at a load of 1100KW. Further the log sheets maintained by the assessee for the period from 19th September, 2006 to 26th September, 2006 indicates that the TG set was in fact put to use post its commissioning. The mere fact that the TG set operates on a lower level of load than its capacity would not justify holding that the machine was not put to use for the purposes of claiming depreciation u/s 32. The TG set as recorded in the minutes of the meeting as well as in the impugned order was ready for performance. However it was unable to perform beyond the load of 1100KW for want of sufficient generation of steam. This does not detract from the finding of fact that it has been put to use to the extent of load of 1100KW for the purposes of the assessee's business. Needless to state that extent of user is not the basis of allowing depreciation u/s 32. The view taken by the Tribunal is a finding of fact on the basis of the evidence before it. The same has not been shown to us to be either arbitrary and/or perverse in any manner. In these circumstances, as the issue is one of finding of fact no substantial question of law arise for our consideration.

(See 2016-TIOL-864-HC-MUM-IT)