“passive user”
The decision most relied on for passive user is Capital Bus Service Pvt. Ltd. v. CIT (123 ITR 404), cited in 91 judgments on BharatTax.
Leading authorities on passive user
Depreciation under section 32 is allowable even if an asset is not actively used, provided it is kept in a condition of readiness or is put ready for use, as this amounts to passive user.
Expenses incurred during the pre-commencement period of a business are not deductible as business expenses or losses, although such expenses may be eligible for depreciation if they can be capitalized to assets. The interpretation of 'used for the purposes of the business' regarding machinery, plant, or buildings, and whether it includes passive as well as active user, was left open.
Depreciation allowance can be claimed for an asset even if it is not actively used in the business, as the term 'used' encompasses both passive and active user. Machinery kept idle may still depreciate.
An asset can be considered 'used' for business purposes, entitling the assessee to depreciation, even if it was only passively used or kept ready for use. The definition of 'used' for depreciation purposes is broader than actual physical employment.
Depreciation can be claimed even for assets that are in passive use, meaning they are not actively generating income but are kept in readiness for use.
