K. Raviraja Pandian, J.@mdashThe assessee is a company incorporated under the provisions of the Companies Act. For the assessment year 1993-94, assessment was completed u/s 143(3) of the Income Tax Act, 1961, on March 29, 1996, determining the total taxable income at Rs. 11,34,15,530. In the said assessment order, the Assessing Officer allowed depreciation for a sum of Rs. 6,90,204.56 in respect of a new unit VSF-III an export oriented unit. On a perusal of the record, the Commissioner of Income Tax found that the machinery pertaining to the VSF-III unit had actually worked for 112 days starting from September 28, 1992, to March 31, 1993. The Commissioner was of the view that as per the proviso to Section 32 of the Income Tax Act, the claim of depreciation should have been restricted to 50 per cent, of the normal depreciation as the asset had actually worked for only 112 days. The excess depreciation of Rs. 2,57,38,370 should have been disallowed. In that view of the matter, the Commissioner regarded the assessment made on March 29, 1996, as erroneous and prejudicial to the interests of the Revenue. A notice u/s 263 of the Income Tax Act was issued and upon hearing the representative of the assessee and on finding that the company commissioned the new unit on September 28, 1992, and the assets worked for 112 days, it was held that as per the second proviso to Section 32 of the Act, the assessee was entitled to only 50 per cent, of the normal depreciation. On that reason, the Commissioner of Income Tax set aside the assessment order and directed the Assessing Officer to restrict the depreciation claimed in respect of the machinery pertaining to the VSF-III unit to 50 per cent.
2. The assessee being aggrieved by the order of the Commissioner filed an appeal before the Income Tax Appellate Tribunal which by its order dated December 8, 2002, upheld the order of the Commissioner of Income Tax. The correctness of the said order is canvassed in this appeal by formulating the following question of law :
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the appellant is entitled to depreciation at the rate of 50 per cent, u/s 32 of the Income Tax Act, 1961?
3. We heard learned Counsel on either side and perused the materials available on record.
4. Section 32(1), as it stood during the relevant period, read as under:
(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed-
(i) omitted;
(ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed:
Provided that where the actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of his business or profession:
Provided further that no deduction shall be allowed under this Clause in respect of-
(a) any motor car manufactured outside India, where such motor car, is acquired by the assessee after the 28th day of February, 1975, unless it is used-
(i) in a business of running it on hire for tourists; or (ii) outside India in his business or profession in another country; and
(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government u/s 42:
Provided also that where any asset falling within a block of assets is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this Clause in respect of such asset shall be restricted to fifty per cent, of the amount calculated at the percentage prescribed under this Clause in the case of block of assets comprising such asset:
Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this Clause shall, in the case of a company, be restricted to seventy-five per cent, of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991.
5. In this case, the claim of the assessee for normal depreciation for the block of assets was restricted to 50 per cent, on the ground that such asset was put to use for a period less than 180 days. Hence, the construction of the expression "put to use" employed in the latter part of the second proviso assumes significance. It is axiomatic that in the absence of definition to a word or an expression, which requires construction, the usual course to be adopted is to assign the meaning given to the word or expression in the legal dictionary. Webster''s Encyclopaedic Unabridged Dictionary of English language, 1989 edition, explains the expression "put to use" as "to apply, employ to advantage".
6. If the expression "put to use" is given the meaning as defined in the dictionary, we are of the view that if the block of assets acquired by the assessee during the previous year is applied or employed for the purpose of business of the assessee in that previous year for 180 days that would make eligible the assessee for full depreciation. The expression "put to use for 180 days" has been interpreted by the Department as well as by the Tribunal as "exploited for 180 days", which, in our opinion, is not correct, because, obviously, the machinery could not be used on all days and every day, right through the year from the date on which it was first put to use. There may be normal working hours even during a day. There may be holidays intervening the 180 days. If the depreciation allowance is to be calculated only with reference to the actual time or day the machinery was actually used, the provision for depreciation will lose its significance.
7. It is an admitted fact that the assets have been used on and from September 28, 1992, viz., for one day in September, 1992; nine days in October; 15 days in November; 18 days in December, 24 days in January, 1993; 16 days in February; and 28 days in March, 1993. Thus, the assets were put to use for the purpose of business or profession of the assessee in the previous year in which it was acquired right from September 28, 1992, which is admitted, as seen from the order of the Tribunal which is to the effect that "admittedly the VSF-III unit had been installed and started functioning from September 28, 1992, to March 31, 1993, only". Though not for all the days, if the date of the first user of the machinery, i.e., September 28, 1992, is taken into consideration for the purpose of this case, till March 31, 1993, the block of assets was used for more than 180 days.
8. The comparable provision in the old Act 1922, which was introduced by means of an amendment to the rule in the year 1960, was the issue for consideration by the Delhi High Court in the case of
(2) In relation to assessments for the year ending on the 31st March, 1961, and subsequent years, the allowance u/s 10(2)(vi) of the Act in respect of depreciation of buildings, machinery, plant or furniture shall be at percentage of the written down value or original cost, as the case may be, equal to (i) 100 per cent.; (ii) fifty per cent.; or (iii) nil per cent.; of the number shown in the corresponding entry in the second column of the following statement, according as the buildings, machinery, plant or furniture have been used by the assessee in his business, profession or vocation during the previous year, (i) for a period of 180 days or more, (ii) for a period of less than 180 days but more than thirty days or, (iii) for a period of thirty days or less than thirty days, respectively.
9. In that case, the Tribunal has taken the view that in terms of the amended rule, in order to get depreciation the asset in question must have been actively used for specified number of days in the business of the assessee. The Tribunal had held that since the bus in question having actually plied by the assessee for less than 30 days during the previous year, the assessee would not be entitled to any depreciation in respect thereof. The Delhi High Court, while considering the issue as to whether the assessee was entitled to depreciation with reference to the amended provision above referred to, relied on the decision of the Bombay High Court in the case of
But, I think that the word ''used'' in this Section may be given a wider meaning and embraces passive as well as active user. Machinery which is kept idle may well depreciate, particularly during the monsoon season. It seems to me that the ultimate test is, whether, without the particular user of the machinery relied upon the profits sought to be taxed could have been made; and as I read the agreement in the case, the profits of the assessee during the year under assessment could not have been earned except by his maintaining his factory in good, working order, and that involves the user of the factory and the machinery.
10. The Delhi High Court also referred to the decision of the Supreme Court in the case of
The words ''used for the purposes of the business'' in Section 10(2)(vi) of the Indian Income Tax Act, 1922, mean used for the purpose of enabling the owner to carry on the business and earn profits in the business. In other words, the machinery or plant must be used for the purpose of that business which is actually carried on and the profits of which are assessable u/s 10(1).
11. The Supreme Court went on to add (page 272):
The word ''used'' has been read in some of the pool cases in a wide sense so as to include a passive as well as active user. It is not necessary, for the purposes of the present appeal, to express any opinion on that point on which the High Courts have expressed different views. It is, however, clear that in order to attract the operations of Clauses (v), (vi) and (vii) the machinery and plant must be such as were used, in whatever sense that word is taken, at least for a part of the accounting year. If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under Clause (vii) in respect of them and the second proviso also does not come into operation.
12. After making a survey of all other earlier cases touching upon the issue starting from N.D. Radha Kishen and Sons v. CIT [1928] 3 ITC 73 (Lah) ;
13. The decision so arrived at by the Delhi High Court with reference to the statutory provision considered by it is squarely applicable to the facts of the present case, in the sense, that in the provision under consideration in this case also the machinery was required to be put to use for a period of 180 days in order to get the full depreciation, we are in complete agreement with the reasoning given by the Delhi High Court. It is also brought to our notice that the decision has not been overruled.
14. For the abovesaid reasoning, the order of the Tribunal is set aside and the appeal is allowed answering the question of law in favour of the assessee and against the Revenue.
