M/S.NITTA GELATINE INDIA LTD. vs. ASST. COMMISSIONER OF INCOMETAX,

ITA/88/2009HC KeralaKLHC01024849200926 August 2016Author: HONOURABLE MR.JUSTICE ANTONY DOMINIC11 pages
AI SummaryAllowed

What were the facts?

This judgment concerns Income Tax Appeals filed by M/s. Nitta Gelatine India Limited (formerly M/s. Kerala Chemicals & Proteins Ltd.) against the Assistant Commissioner of Income Tax, Circle-1(1), Ernakulam. The appeals challenge orders passed by the Income Tax Appellate Tribunal, Cochin Bench. The specific assessment years and the amounts in dispute are not explicitly stated in the provided text. The procedural history involves appeals being heard by the High Court of Kerala.

What did the High Court hold?

The High Court of Kerala held that depreciation on plant and machinery is allowable from the date the asset is installed and ready for use, irrespective of whether commercial production has commenced. The Court reasoned that the condition for allowing depreciation under Section 32 is that the asset should be 'used' by the assessee for the purpose of business. Being ready for use and installed constitutes 'use' for the purpose of business. Therefore, the Tribunal erred in upholding the disallowance of depreciation. The Court directed that depreciation should be allowed from the date the plant and machinery were ready for use. The ratio decidendi is that the 'use' of an asset for business purposes, for the purpose of claiming depreciation, includes being installed and ready for operation, even if commercial production has not yet commenced.

What were the issues?

1. Whether the Tribunal erred in upholding the disallowance of depreciation on plant and machinery, which the assessee claimed was installed and ready for use, despite the commencement of commercial production being delayed. (Section 32 of the Income Tax Act, 1961) Assessee's Contention: The assessee argued that the plant and machinery were installed and ready for use during the relevant assessment year, and therefore, depreciation should be allowed. They relied on the principle that mere delay in commencement of commercial production does not disentitle the assessee to depreciation if the asset is ready for use. Revenue's Contention: The revenue contended that depreciation is allowable only from the date of commencement of commercial production, and since production had not yet begun, the claim for depreciation was premature. They likely argued that the asset was not 'put to use' in the intended commercial sense.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE SMT. JUSTICE P.V.ASHA FRIDAY, THE 26TH DAY OF AUGUST 2016/4TH BHADRA, 1938 ITA.No. 88 of 2009 ( ) ----------------------- ITA.NO. 195/COCH/07 AND 368/COCH/07 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN -------------- APPELLANT/APPELLANT: ---------------------------------------- M/S. NITTA GELATINE INDIA LIMITED, (FORMERLY M/S. KERALA CHEMICALS & PROTEINS LTD), PANAMAPILLY NAGAR, KOCHI-36., PAN NO. AABCK 1582H

BY ADVS.SRI.JOSEPH KODIANTHARA SRI.TERRY V.JAMES RESPONDENT/RESPONDENT : ---------------------------------------------- ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), ERNAKULAM.

BY SRI.P.K.R. MENON, SENIOR ADVOCATE ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 26-08-2016,ALONG WITH I.T.A.NO.245 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts

I.T.A.NO.88/2009

Appendix — schedule of exhibits
APPENDIX PETITIONER'S ANNEXURES: ANNEX A COPY OF THE LETTER OF OFFER ANNEX B COPY OF THE ORDER DATED 27/2/2006 OF THE ASSESSING O

The order continues below.

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