C I T vs. M/S NAHAR EXPORTS LTD.

ITA/107/2007HC Punjab & HaryanaPHHC01072777200723 April 2007Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE RAJESH BINDAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the revenue. The Court relied on its previous decision in the case of The Commissioner of Income Tax-III, Ludhiana v. M/s Oswal Woolen Mills Ltd., Ludhiana (ITA No. 552 of 2006 and another connected ITA No. 555 of 2006, decided on 5.4.2007). In that judgment, the Court had held that even if new machinery installed by the assessee has not been put to use, it would not disentitle the assessee from claiming depreciation under Section 32. The reasoning was that once machinery is purchased and installed, it starts depreciating, and non-use for various reasons does not mean the machinery remains new or its value static. The Court further referred to its earlier judgment in Commissioner of Income Tax v. PEPSU Road Transport Corporation, which was also against the revenue. Therefore, the substantial question of law raised by the revenue was decided against it.

What were the facts?

The appeal, filed by the Commissioner of Income Tax-III, Ludhiana (the revenue) under Section 260A of the Income Tax Act, 1961, challenges an order dated July 31, 2006, passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 752/Chandi/2000. The assessment year in question is 1996-97. The dispute concerns the allowance of normal depreciation on machinery. The ITAT had previously ruled in favor of the assessee, M/s Nahar Exports Ltd., Ludhiana, on this matter. The revenue contends that the machinery was not used for business purposes throughout the year, making the depreciation claim invalid.

What were the issues?

1. Whether, on the facts and circumstances of the case, the ITAT was legally correct in allowing a normal claim of depreciation on machinery that was not used at all for business purposes throughout the year under consideration, under Section 32 of the Income Tax Act, 1961? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that depreciation under Section 32 of the Act cannot be claimed on machinery that was not put to use for business purposes during the relevant assessment year. They relied on the principle that actual use is a prerequisite for claiming depreciation.

Which sections of the Income-tax Act were involved?

Section 32,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
In the High Court of Punjab and Haryana at Chandigarh ITA No. 107 of 2007 Date of Decision: 23.04.2007 The Commissioner of Income Tax-III, Ludhiana …Appellant Versus M/s Nahar Exports Ltd., Ludhiana …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE RAJESH BINDAL Present: Mr. Sanjiv Bansal, Advocate, for the appellant-revenue.

ORDER M.M. KUMAR, J. The instant appeal filed under Section 260A of the Income Tax Act, 1961 (for brevity, ‘the Act’), has been directed against the order dated 31.7.2006, passed in ITA No. 752/Chandi/2000, in respect of assessment year 1996-97. The revenue has claimed that following substantial question of law would arise for determination of this Court:- Whether on the facts and the circumstances of the case, the ITAT was right in law in allowing normal claim of deprecation on machinery which was not used at all for business purposes throughout the year under consideration under section 32 of I.T. Act, 1961? While dealing with exactly the same question of law in the case of The Commissioner of Income Tax-III, Ludhiana v. M/s Oswal Woolen Mills Ltd., Ludhiana (ITA No. 552 of 2006 and ITA No. 107 of 2007 another connected ITA No. 555

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 32

All 2,762 judgments and leading authorities on Section 32 →

Recent GST High Court judgments

Search GST case law →