Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/S. Bharat Potteries (P) Ltd. Road

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 1.D.B. Income Tax Appeal No. 493 / 2008 Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus M/s. Bharat Potteries (P) Ltd. Road No.6, VKI Area, Jaipur. ----Respondent Connected With 2. D.B. Income Tax Appeal No. 88 / 2011 Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus M/s. Bharat Potteries Ltd., F-555-559, Road No.6, VKI Area,Jaipur. ----Respondent 3. D.B. Income Tax Appeal No. 194 / 2016 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s. Bharat Potteries Ltd., F-555-559, Road No.6, VKI Area, Jaipur. ----Respondent 4. D.B. Income Tax Appeal No. 203 / 2016 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s. Bharat Potteries Ltd., F-555-559, Road No.6, VKI Area, Jaipur. ----Respondent5. D.B. Income Tax Appeal No. 208 / 2016 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s. Bharat Potteries Ltd., F-555-559, Road No.6, VKI Area, Jaipur. ----Respondent 6. D.B. Income Tax Appeal No. 213 / 2016 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s. Bharat Potteries Ltd., F-555-559, Road No.6, VKI Area, Jaipur. ----Respondent 7. D.B. Income Tax Appeal No. 15 / 2017 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s. Bharat Potteries Ltd., F-555, Road No.6, VKI Area, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur with Mr. Prateek Kedawat for Mr. R.B. Mathur For Respondent(s) : Mr. Mahendra Gargieya _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 12/09/2017 1. In all these appeals common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has partly allowed the appeal of the assessee and dismissed the appeal ofthe department. 3.This court while admitting the appeals framed following substantial questions of law:- 3.1 Appeal No.493/2008 admittedon 10.12.2008 (i) Whether in the facts andcircumstances of the case, the ITAT hasacted illegally and perversely and wasjustified in allowing the benefit ofdepreciation of Rs.38,06,352/- u/s 32 ofthe Act on the machineries which werenot put to use before the end of theprevious year i.e. 31.3.2001. (ii) Whether in the facts andcircumstances of the case, the ITAT hasacted illegally and perversely in deletingthe additions on account of excessivewastage which was restricted to 20% bythe AO by invoking the provisions ofSec.145(3) of the Act. (iii) Whether in the facts andcircumstances of the case, the ITAT hasacted illegally and perversely and hasgrossly erred in deleting the addition ofRs.2,61,232/- on account of valuation ofthe closing stock as per provisions of Sec.145A.” 3.2Appeal No.88/2011 admitted on 30.7.2012 1. “Whether in the facts andcircumstances of the case, the ITAT hasacted illegally and perversely and hasgrossly erred in deleting the additions onaccount of excessive wastage which wasrightly and on the basis of recordrestricted to 20% by the AssessingOfficer?” 3.3 Appeal No.194/2016 admitted on 15.11.2016 “1. Whether in the facts andcircumstances of the case, the ITAT wasjustified in deleting trading of Rs.27730981/- on account of excessivewastage which was rightly and on thebasis of record restricted to 20% by theAssessing Officer.” 3.4 Appeal No.203/2016 admitted on 25.4.2017 3.2Appeal No.88/2011 admitted on 30.7.2012 1. “Whether in the facts andcircumstances of the case, the ITAT hasacted illegally and perversely and hasgrossly erred in deleting the additions onaccount of excessive wastage which wasrightly and on the basis of recordrestricted to 20% by the AssessingOfficer?” 3.3 Appeal No.194/2016 admitted on 15.11.2016 “1. Whether in the facts andcircumstances of the case, the ITAT wasjustified in deleting trading of Rs.27730981/- on account of excessivewastage which was rightly and on thebasis of record restricted to 20% by theAssessing Officer.” 3.4 Appeal No.203/2016 admitted on 25.4.2017 “1. Whether in the facts andcircumstances of the case, the ITAT wasjustified in deleting trading of Rs.16981473/- on account of excessivewastage which was rightly and on thebasis of record restricted to 20% by theAssessing Officer.” 2. Whether on the facts andcircumstances of the case and in law theITAT was justified in not considering thatthe estimation of wastage madeAssessing Officer was on the basis ofreport of Central Glas and CeramicInstitute, Kolkata which is anindependent agency having expertise inthe related filed. 3. Whether on the facts andcircumstances of the case and in law theITAT was justified deleting the addition ofRs. 429345/- made for depositing theemployee’s contribution to PF & ESIbeyond the prescribed time limitprovided in the respective Act. 4. Whether on the facts andcircumstances of the case and in law theITAT was justified in holding that theemployees’ contribution to PF & ESI aregoverened by the provisions of Section43B and not by Section 36(1) (va) r.w.s2 (24) (x) of the Income Tax Act.” 3.5Appeal No.208/2016 admitted on25.4.2017 “1. Whether in the facts andcircumstances of the case the ITAT was justified in deleting trading of Rs.10108390/- on account of excessivewastage which was rightly and on thebasis of record restricted to 20% by theAssessing Officer? 2. Whether on the facts and in law theITAT was justified in not considering thatthe estimation of wastage made byAssessing Officer was on the basis ofreport of Central Glas and CeramicInstitute, Kolkata which is anindependent agency having expertise inthe related filed.” 3.6Appeal No.213/2016 admitted on 25.4.2017 “1. Whether in the facts andcircumstances of the case the ITAT wasjustified in deleting trading of Rs.11904998/- on account of excessivewastage which was rightly and on thebasis of record restricted to 20% by theAssessing Officer? 2. Whether on the facts and in law theITAT was justified in not considering thatthe estimation of wastage made byAssessing Officer was on the basis ofreport of Central Glas and CeramicInstitute, Kolkata which is an independentagency having expertise in the relatedfiled.” 3.7 Appeal No.15/2017 admitted 7.2.2017 “1. Whether in the facts andcircumstances of the case, the ITAT wasjustified in deleting trading of Rs.2,95,65,756/- ignoring the fact that theAssessingOfficermadeadditionreasonably and rejected books ofaccounts pointing out specific defects inthe books of accounts.” 4.The facts of the case are that the assessee company toderive income from manufacturing and sale of corckery ware. Inthe trading account the assessee has shown gross profit ofRs.1,45,81,178/- on total sales (excluding excise duty) atRs.5,25,05,366/- thus declare GP rate @ 27.77% as against GP @27.92% in the immediately preceding year on total sale ofRs.4,18,50,282/- and @ 29.34% during the period relevant to theassessment year 1999-2000 reasons of decline in gp ratio as perthe submissions of the assessee vide its’ A/R’s letter dt. 19.8.03was increase in repair and maintenance expenses. 4.The facts of the case are that the assessee company toderive income from manufacturing and sale of corckery ware. Inthe trading account the assessee has shown gross profit ofRs.1,45,81,178/- on total sales (excluding excise duty) atRs.5,25,05,366/- thus declare GP rate @ 27.77% as against GP @27.92% in the immediately preceding year on total sale ofRs.4,18,50,282/- and @ 29.34% during the period relevant to theassessment year 1999-2000 reasons of decline in gp ratio as perthe submissions of the assessee vide its’ A/R’s letter dt. 19.8.03was increase in repair and maintenance expenses. 4.1In order to look into the reality, production results of theassessee were examined, in view of its consumption of rawmaterial and production there from. To begin with the assessee’sproduction of crockery wares are renowned all over the country aswell as in foreign also, recently a survey u/s 133A was carried outat the business premises on 16.1.04 and it was observed thatthere was practice of preparing day to day production sheets intheir production department accordingly the assessee vide ordersheet entry dt. 1.3.04 was asked to produce the same before theundrsigned, this facts was remained vide order sheet entry dt.23.3.04 also but as evident from my observations contained in theorder sheet entry dt. 26.3.04 no such production sheets wereproduced. 5.Counsel for the assessee for the convenience of the courthas framed following substantial question of law and has given chart for the purpose of referring para in different appeals which reads as under:- S.Questions of Law DBITADBITA 88/11DBITA 213/16DBITA 208/16DBITA203/16DBITA 194/16DBITANo493/08(A/0(A/O(A/oA/o(A/o(A/o15/17.257/JP/05)660/JP/10)685/JP/13)891/JP/13) AY769/JP/14) AY770/JP/14)(A/oAY 01-02AY 07-08 AY 08-0909-1010-11AY 11-12327/JP/16) AY 12-131. Allowing the benefitAOPg 13-27 Prof depreciation u/s16-24(PB32onthe26-40)machinerieswhichCIT(A) Pg 17-29 Prwere not put to use601-6017 (PBbefore the end of the64-76)previous year i.e.ITAT Pg 13-15 Pr31.03.200110-15(PB95-98)Admitted Q.1Of LawAmount Rs.38,06,352/-2. DeletingtheAOPg 2-13 Pr 2-Pg 2-6 Pr 3-401Pg 8-9, Pradditions on account15 (PB 15-(PB 10-14)4.3-55 (PBof excessive wastage26)8-9)which was restrictedCIT (A) Pg 3-17 PrPg 2-4 (PB 16-Pg 2-9 Prto 20% by the AO3.1-3.16 (PB18)3-3.6 (PBu/s 145(3)61-64)11-18)ITAT Pg 2-12 Pr 4-Pg 1-4 Pr 3-9Pg 1-3 (PB7 (PB 85-95)(PB 19-21)19-21)Admitted Q.211 & 21 & 21 & 2 1 & 21Of LawAmount Rs.Rs.Rs.Rs.Rs.Rs.2,77,30,981/Rs.2,95,65,39,49,963/-1,30,18,723/-1,19,04,998/-1,01,08,390/-1,69,81,473/--756/-3. Deleting on accountAOPg 29-30 Prof valuation of the28 (PB 42-closing stock as per43)provisions of sectionCIT (A) Pg 32-34 Pr145A9.1-9.4 (PB79-81)ITATPg 17 Pr 21-22 (PB 100) Admitted Q.3Of LawAmountRs.2,61,232/-4.Deleting on accountAOPg 30-31 Profincorrect29 (PB 43-deductionsof44)MODVAT credit. CIT(A)Pg 34-35 Pr10-10.3 (PB81-82)ITAT4Admitted Q.Of LAwAmountRs.1,01,604/-5. Deleting the additionAOmade for depositingCIT(A)employee'sITATcontribution to PF &ESI beyond theAdmitted Q.3 & 4prescribed time limitOf LawAmountRs. 4,29,345/- 6.Counsel for the appellant Mr. Mathur has taken us to theorder of the AO, who after considering the evidence on record hasobserved as under:- Admitted Q.3Of LawAmountRs.2,61,232/-4.Deleting on accountAOPg 30-31 Profincorrect29 (PB 43-deductionsof44)MODVAT credit. CIT(A)Pg 34-35 Pr10-10.3 (PB81-82)ITAT4Admitted Q.Of LAwAmountRs.1,01,604/-5. Deleting the additionAOmade for depositingCIT(A)employee'sITATcontribution to PF &ESI beyond theAdmitted Q.3 & 4prescribed time limitOf LawAmountRs. 4,29,345/- 6.Counsel for the appellant Mr. Mathur has taken us to theorder of the AO, who after considering the evidence on record hasobserved as under:- "23. On careful consideration I do not find theassessee's submission convincing because asdiscussed in this order in the foregoingparagraphs that the assessee has furnished acopy of certificate of Shri R.L Sharma, its PlantEngineer and copies of fabrictaion bills one isdated 27.3.01 from M/s ChoudharyEngineering Co V & Post Agoura (U.P) andanother is dated 26.3.2001 from Shri OmPrakash Mistree. Perusal of the first bill clearlyshows that date of completion of new glowstmachine for which the bill was raised for Rs.80,000/- was no where mentioned in the bill(copy of the bill is placed on record (at casefile page 37 volume-II).Similarly in the secondbill also neither the complete detail of work was given not the date of completion wasmentioned (copy of the bill is placed on record(at case file page 38 volume-II). Since ShriOm Prakash Mistree was local, he wassummoned u/s 131 and his statements wererecorded, in the statements he was askedsame basic questions regarding making of thecontinuous pusher type furnace was made ofinsulated bricks and insulated mixture, owingto high temperature iron and steel cannot beused inside the furnace, hence it was madeout of these sort of bricks and mixture only.Needless to say that these bricks form basicpart of compositions of the furnace. Ahri OmPrakash further explained that approximately7-8 thousand bricks would be needed for thefurnace like that of the assessee. In thebeginning Shri Om Prakash, who is nor anqualified Engineer states that the work of thefurnace was done under the supervision of oneengineer from Ahemdabad, so it was in theinterest of justice to contact Mr. A.B.Sharma ofM/s Sharma Kiln Technology who providedtechnical service to the assessee in thisregard, accordingly Mr. Sharma was contactedand he was asked to tell as to how much timewas required for completion of such furnace.As per the information given by Shri Sharma,who is a qualified Engineer and has authorityover the subject it would take 3-4 month tocomplete. Now coming to the stores ands[pare stock register of the assessee producedbefore the under signed, account of insulatedbricks was maintained at page-281 and whatis shown in the register is that 6000 insulatedbricks were purchased from one M/s NagrangCeramics, address of which was not mentionedin the register, vide his bill No. 130 dated28.03.2001 it is interesting to note here thatthese bricks were shown to have beenreceived on the same day i.e. on 28.03.01 atthe assessee door step and even shown issuedfor use in the continuous paper type furnaceon the same day i.e. 28.03.2001. Thispurchase of 6000 bricks was in addition to4000 bricks purchased by the assessee fromthe same supplier i.e. M/s Nav RangRefractories Pvt. Ltd. Vide his bill No. 128 dt.21.03.2001. It is worthwhile to mentionedhere that 7000 kg insulation bricks mentionedin bill dated 21.03.2001. On the basis of thesefacts it can be safely inferred that basic material of furnace was being issued upto28.03.2001, what to say about completion ofthe work and commissioning of 45 mtr longfurnace on 28.03.2001 as claimed by theassessee." 6.1He further contended that depreciation has been claimed inview of Section 32(1) and provision for machinery was not put to use. The same was also approved by the CIT(A) in para no.6.15which reads as under:- material of furnace was being issued upto28.03.2001, what to say about completion ofthe work and commissioning of 45 mtr longfurnace on 28.03.2001 as claimed by theassessee." 6.1He further contended that depreciation has been claimed inview of Section 32(1) and provision for machinery was not put to use. The same was also approved by the CIT(A) in para no.6.15which reads as under:- 06-15 eSaus lHkh rF;ksa ij cgqr xgjkbZ ls fopkj fd;k ,oa ik;kfd vihykFkhZ ds vuqlkj dUVhU;wvl iq’kj Vkbi Qjusl fnukad28-3-2001 dks dke esa yh x;h vkSj ;g 100 izfr’kr g~klds ;ksX; gS] tks g~kl ds 'ksM~;wy ds ,isfUMDl &I(Appendix-I) dh 100 izfr’kr g~kl nj esa vkrk gSA vihydh lquokbZ ds nkSjku djhc &djhc ogh nyhys nha] tks fu- v-ds lkeus nh xbZ FkhA fu-v- us fo’ks"kRkkSj ls Jh vke izdk’kBsdsnkj ds c;ku fnukad 24-3-2004] Jh ,-ch- 'kekZ] ch-Vsd-]vgenkckn ds c;ku fnukad 24-3-2004 vkSj Jh vkj-,y- 'kekZ]IykaV bathfu;j ds c;ku fnuakd 19-3-2004 rFkk Qjus’k esayxus okyh lkexzh dh [kjhn ds vk/kkj ij ;g fu.kZ; fy;kfd ;g Qjus’k fnukad 31-3-2001 rd rS;kj ugha gks ldrk FkkrFkk mi;ksx esa ugha yk;k tk ldrk FkkA blfy, bl ij g~klxyr rjhds ls ekaxk x;k Fkk A eSaus Jh vkse izdk’k dqekor dsc;kuksa dks xkSj ls ns[kk] ftlesa mlus crk;k fd mlus viusHkkbZ Jh [kse pan ds lkFk feydj :- 75000 esa vihykFkhZ dsHkVV~s fuekZ.k dk Bsdk tuojh] 2001 esa fy;k Fkk] rFkkvgenkckn ls vk, ,d bathfu;j dh ns[kjs[k esa djhc 45ehVj yach] djhc 5-6 QhV Åaph rFkk djhc 7 QhV pkSM+hxksykdkj HkV~Vh cukdj nsuh Fkh] tks 7&8 dkjhxjksa rFkk 7&8csynkjksa dks yxkdj fnukad 24-3-2001 dks iwjk dj fn;k Fkk]mlds ckn mls irk ugha] ysfdu Qsczhds’ku dk dkelkFk&lkFk gh gksuk crk;kA Jh vkse izdk’k us vius c;ku dsiSjk &5 esa ;g Hkh crk;k fd Qk;j fczDl o bUlwys’ku elkykdke esa vkrk gS] D;ksafd HkV~Vh ds varj yksgk o LVhy dke esaugha vkrk A vkxs iSjk &7 esa crk;k fd HkV~Vh esa djhc 7&8gtkj bUlwysVsM bZVs yxrh gSA Jh ,-ch- 'kekZ ds c;kuvgenkckn esa gh fnukad 24-3-2004 dks vk;dj vf/kdkjh]okMZ&6(2), vgenkckn us ntZ fd;s] ftlesa crk;k fd Jh,-ch-’kekZ us vihykFkhZ dks HkV~Vs fuekZ.k dh lykg nh Fkh] tksvihykFkhZ ds ;gka igys tuojh] 2001 esa vk;k Fkk ¼rkjh[k Bhdls ekywe ugha Fkh½ vkSj vkf[kjh ckj ekpZ] 2001 ds vafrelIrkg esa x;k Fkk] tc ykbfuax odZ] ls lfed dk fQafVxodZ] CysadsV]cjukSy fQfVax dk dke iwjk ugha gqvk Fkk] mlds ckn flQZ mRiknu esa yhdst dh leL;k,a ns[kus x;k Fkk]ftlds ckjs esa dksbZ rkjh[k c;ku esa ugha gSA ckn flQZ mRiknu esa yhdst dh leL;k,a ns[kus x;k Fkk]ftlds ckjs esa dksbZ rkjh[k c;ku esa ugha gSA vkj-,y-’kekZ] IykaV bathfu;j ds bl Qjusl ls lacaf/kr c;kuksadk Hkh xgjkbZ ls v/;;u djus ij ik;k fd Jh vkj-,y- 'kekZus iz’u& 54 ds tokc esa]Jh vkse izdk’k dqekor ¼Bsdsnkj½ usdc dke 'kq: fd;k] ds ckjs esa dqN ughas tkurk FkkA Jhvkj-,y-’kekZ us iz’u &55 ds mRrj esa crk;k fd Jh vkseizdk’k us djhc ,d eghus esa HkV~Vh fpukbZ dk dke iwjk fd;kiz’ku&56 ds tokc esa Jh vkj-,y- 'kekZ us dgk fdQ~ysfDlcy ikbi] lUlscy oky] ,;j Cyksoj] cuZls] Mhch,y]iafix ;wfuV vkfn eq[; :i ls flfoy odZ ds iwjs gksus ds ckngh bUlVkYM fd, tk ldrs gSa vkSj var esa iz’u &57 ds tokcesa crk;k fd Qjus’k dh Vuy esa 12 cuZj rFkk 8&9 CyksolZfQDl fd, x,] ftuesa de ls de 2 eghus dk le; pkfg,Atgka rd bUlwysVsM bZVksa dh [kjhn ds ckjs esa fu-v- us fy[kkgSA fd 4000 bZVsa eSa- uojax fjQszDVªht izk- fy- ls muds fcyuacj 128 fnukad 21-3-2001 }kjk [kjhnh gS] rFkk 6000 bZVsa eSauojxa lsjkfeDl ls fcy uacj 130 fnukad 28-3-2001 }kjk[kjhnh tks fnukad 28-3-2001 dks gh izkIr gks xbZ rFkk HkVVs esamlh fnu yxk nh x;h] tks mfpr izrhr ugha gksrkA mi;qZDrrF;ksa dks /;ku ls ns[kus ij ;g yxrk gS fd HkV~Vs dh fpukbZdk dke tuojh ] 2001 ls 'kq: gks x;k Fkk rFkk Qsczhds’ku dkdke Hkh lkFk&lkFk py jgk Fkk] tks Jh vkse izdk’k dqekorrFkk Jh ,-ch- 'kekZ ds c;kuksa ls utj vkrk gSA Jh ,-ch- 'kekZus Hkh ekpZ] 2001 ds vkf[kjh lIrkg esa vihykFkhZ dh QSDVªh dhfoftV esa dqN dke 'ks"k gksuk crk;k] ysfdu bZVksa dh [kjhnrFkk LVWkd jftLVj ds ist& 281 dh tkap ij fu-v- us ik;kfd 6000 bZVksa eSa- uojax lsjkfeDl ls fcy uacj 130 fnaukd28-3-2001 ls [kjhnh rFkk 4000 bZVksa eSa- uojax fj¶zsDVªht izk-fy- ls fcy fnaukd 21-3-2001 ls [kjhnh vkSj 7000 fd-xzk-eksjVkj Hkh fnukad 21-3-2001 dks gh [kjhnk rks fQj fpukbZ dsfy, lkexzh tuojh] 2001 esa ;k rkjh[k 21-3-2001 rFkk 28-3-2001 ls igys miyC/k gh ugha Fkh] rks HkV~Vs dh fpukbZ fdlthp ls dhA blds vykok vU; lkexzh Hkh fnukad 22-3-2001ls 24-3-2001 dks fuEu izdkj ls [kjhnh rks dc fpukbZ gqbZ rFkkdc fQfVax@fQfuf’kax dk dke gqvkA S.N.Dt. of entryParticularsBill no.Dt. of billItem nameAmount122.3.01Themo TPI/34519.3.01Cerachem Rs.439984technology Pvt blanketLtd222.3.01-do-TPI/34619.3.01Cera blanketRs.124938322.3.01Gadia1514415.3.01DS -100Rs.26779422.3.01-do-1516216.3.01Different type Rs.57259MCCB522.3.01Adcon instrument 295523.3.01Thermo couple Rs.136365 Pvt.Ltd.etc624.2.01R.K. Steels413823.3.01MS Iron steelRs.11970724.2.01Karni Inds.1424.3.01DI Control Rs.104600Panel 6.2He contended that the depreciation claimed cannot be givento the assessee. 6.3On the other hand, regarding wastage and other, the viewtaken by the tribunal is just and proper and in case of 145A forthe Modvat Credit, the view taken by the tribunal is not just andproper and the Modvat Credit ought not to have been allowed tobe deducted. 6.4He has relied upon the Karnataka Judgment in The DeputyCommissioner of Income Tax, Speial Range-4 vs. YellammaDasappa Hospital (2007) 290 ITR 353 (KAR) wherein it has beenheld as under:- “5. The only question that requires ourconsideration is as to whether the assesses isentitled for benefit of depreciation in terms ofSection 32 of the Indian Income Tax Act. Theassessing officer noticed that the firm did notproduce any evidence in respect of claim ofdepreciation. The assessing officer noticesthat the firm did not produce copies ofprescriptions produced by the professionals.It also noticed that no prescription slips weremade available to indicate that there was norecommendation to use these imported itemsof machinery or indigenous machinery whichare under dispute for claim of depreciation.When the same was challenged before theappellate authority, the appellate authoritynotices that the machinery was kept readyfor use but could not be used and that “5. The only question that requires ourconsideration is as to whether the assesses isentitled for benefit of depreciation in terms ofSection 32 of the Indian Income Tax Act. Theassessing officer noticed that the firm did notproduce any evidence in respect of claim ofdepreciation. The assessing officer noticesthat the firm did not produce copies ofprescriptions produced by the professionals.It also noticed that no prescription slips weremade available to indicate that there was norecommendation to use these imported itemsof machinery or indigenous machinery whichare under dispute for claim of depreciation.When the same was challenged before theappellate authority, the appellate authoritynotices that the machinery was kept readyfor use but could not be used and that therefore the appellant is entitled fordepreciation in terms of his order. He allowedthe appeal in part. When the same waschallenged by the Deputy Commissionerbefore the Tribunal, the Tribunal on theground of keeping the machinery ready foruse has chosen to grant the entire benefits.Let us see as to whether the grant ofdepreciation benefits is permissible on thefacts of this case. 6. Section 32 of the Indian Income Tax Actwould provide for depreciation. The saidSection would show that deduction ondepreciation is permissible in the event ofmachinery, plant or furniture owned by theassessee and used for the purposes of thebusiness or profession. The said wordingsused have been considered by the Courts oflaw. 18. The Bombay High Court has ruled thatthe word 'used' in Section 32 of the IncomeTax Act, 1961, denotes that the asset hasbeen actually used and not that it is merelyready for use. The expression 'used' meansactually used for the purposes of thebusiness, A Special Leave Petition filedagainst the said Judgment stood dismissedMANU/WB/0214/2003MANU/WB/0214/2003 : [2004]266ITR106(Cal) . We are inagreement with the views expressed by theBombay, Calcutta and Madhya Pradesh HighCourts. In the light of these Judgmentsdirectly available on record, we are of theview that the kept ready theory is notavailable to the assessee for the purpose ofclaiming depreciation when the Legislaturehas chosen to use the word 'used' we have togive a full meaning to it and avoid readingsomething not intended by the Legislation.After all, these benefits are provided forcertain purposes. That purpose is used interms of the Statute. If the machinery is notused, Section 32 is not applicable and hence,the assessee cannot have any benefits, ifgranted would result in reading somethingwhich is not provided in the Statute in termsof Section 32.” 7.Counsel for the respondent Mr. Gargeiya has taken us to theorder of the Tribunal which reads as under:- "9. In Ground No.2 and 3, the Revenue isaggrieved taht the ld. CIT(A) has erred indisallowing depreciation amounting toRs.13,59,029/- on pusher type furnace. Thedisallowance of depreciation is totallyunwarranted. 7.Counsel for the respondent Mr. Gargeiya has taken us to theorder of the Tribunal which reads as under:- "9. In Ground No.2 and 3, the Revenue isaggrieved taht the ld. CIT(A) has erred indisallowing depreciation amounting toRs.13,59,029/- on pusher type furnace. Thedisallowance of depreciation is totallyunwarranted. 11. We have perused the facts of the case. Asregards the depreciation on complete plant ofhallowware and flatware where the assesseehas claimed the depreciation of Rs.6,39,482/-. Shri R N Sharma, Plant Managerwas examined where Shri Sharma stated thatthe machine started within 10 days. The AOformed a view that the machine started within10 days from 31-03-01. Whereas the assesseefiled a factory Memo dated 31-03-01 signed byShri R N Sharma that production from the saidmachine started w.e.f. 27-03-01. All the partsof the machine had reached Delhi during theimpugned year. As regards two of opeartingparts light barrier and cable socket were alsoreceived at Jaipur on 27-03-01. Shri R NSharma was examined on 19-03-04 muchafter three years of close of the impugnedyear and his statement cannot bemisinterpreted especially when a statementgiven by a person after a lapse of long time.Therefore, the matter has to be decided on thebasis of the evidences. Shri Sharma hadissueed a certificate that the said machine wascommissioner on 27-03-01 which is on record.The said certificate was filed before, thestatement of Shri Sharma was recorded. Inanswer to Question No.9, Shri Sharma repliedthatittook9monthsinfullassemble/erection/installationandcommission. The 9 months period from 8-6-2000 is completed on 8-3-2001, has beenargued by the ld. Counsel for the assessee.The assessee has claimed the commissioningof the machine on 27-03-01 and therefore.The replies given by Shri Sharma and otherevidence on record have been perused and weare of the view that the complete plant andhollowware and flatware was put to use duringthe impugned year on 27-3-01. 15. We have perused the facts of the case. Allthe allegations made by the AO have beenperused by us but there is no documentaryevidence with the Department against theassessee with which it can be said that thesaid machine has not been put to use duringthe impugned year whereas the assessee hasfurnished the fabrication charges bill certificatefrom AGM, Production and bill of fuelconsumption and quantitative details of workin progress and in such circumstances, we donot find any reason that the said machine isnot put to use during the impugned year andtherfore, we reverse the findings of the ld. CIT(A) and direct the AO to allow the depriciationof Rs. 13,59.029/- as claimed by the oncontinuous pusher type machine. Thus GroundNo. 2 and of the Revenue are dismissed andGround No. 2 of the assessee is allowed. 25. WE have perused the facts of the case.The explanation of the assessee was that theas per accounting standard closing stock ofraw material was to be valued exclusive ofexcise duty as the assessee was claimingMODVAT. AS such, the income was overstatedon account of inclusion of excise duty in thevalue of the closing stock of raw material forthe F.Y. 2000-01 i.e. for the impugned yearwas valued exclusive of excise duty and thesaid amount of Rs. 1,01,604/- was on accountof the said reason. The excise duty hasalready been paid more than it was due in theassessment year 2000-01 and there was nojustification to add the said amount into thetotal income of the assessee. In suchcircumstances and facts of the case, when theclosing stock does not include the excise dutyand the opening stock is inclusive of exciseduty, the remarks were made by the auditor.The remarks of the auditor were made for theyear ending 31-03-2000 relevant toasserssment year 2000-01 and therefore, thesaid amount does not have any relevance forthe profit of the impugned year. In suchcircumstances and facts of the case, theadditions made by the AO is directed to bedeleted and the other of the ld. CIT(A) isreversed. Thus Ground No.5 of the assessee isallowed." 8.Regarding question of no.1, he has relied upon the followingdecisions:- 8.1 In Stitchwell Qualitex (RF) vs. CIT (2005) 276 ITR 0625 (All.) it has been held as under :- 8. As noted by this Court in a recent decisionin National Thermal Power Corporation Limitedv. Commissioner of Income Tax(2013) 357ITR 253 (Del), two conditions are necessary tobe fulfilled before an allowance by way ofdepreciation under Section 32of the Act canbe granted to the Assessee. The first isownership of the asset and the second, theuser of the assets for the purposes of thebusiness. The Court on the facts of the saidcase rejected the stand of the Revenue thatthe machinery and equipment had to be put toactual use and that it would not be enough ifthey were "kept ready for use". The Courtreferred to a large number of decisions of theHigh Courts which held that the expression"used for the purpose of business" in Section32of the Act was interpreted to include a casewhere the asset is kept ready for use but isnot actually put to use. These included WhittleAnderson Ltd. v. CIT(1971) 79 ITR 613(Bom); CIT v. Yamaha Motor India Pvt. Ltd.(2010) 328 ITR 297 (Del); CIT v. VayithriPlantations Ltd. (1981)128 ITR 675 (Mad) andCIT v. Refrigeration and Allied Industries Ltd.(2001) 247 ITR 12 (Del). 9. The Supreme Court in Federation of AndhraPradesh Chambers of Commerce v. State ofAndhra Pradesh(supra), was interpreting the word"used" occurring in Section 3 of the AndhraPradesh Non-Agricultural Lands AssessmentAct, 1963. The question in that case waswhether the agricultural lands of the Assesseehad been used for industrial purposes so as tosubject it to levy of 'assessment' . It was heldin that context that that "it is only land whichis actually in use for an agricultural purpose asdefined in the said Act that can be assessed tonon-agricultural assessment at the ratespecified for land used for industrial purpose."In other words, given the background in which the question arose, the interpretation placedon the word 'used' was in favour of theAssessee. 8.2 InAnil Bulk Carriers (P) Ltd. vs. Commissioner of IncomeTax (26.10.2004 - ALLHC) : MANU/UP/1030/2004 it has been heldas under:- the question arose, the interpretation placedon the word 'used' was in favour of theAssessee. 8.2 InAnil Bulk Carriers (P) Ltd. vs. Commissioner of IncomeTax (26.10.2004 - ALLHC) : MANU/UP/1030/2004 it has been heldas under:- 5. The appellant-assessee took delivery ofcomplete tankers along with body mountedon the chasis on 26th March, 1997, fromMotor and General Sales, Allahabad. The salecertificates issued by the selling dealer are onrecord. The authorities below have notaccepted the case of the assessee-appellantabout the use of trucks in question on theground that the assessee could not producethe documents to show that these tankerswere used by the appellant-assessee on thelast day of the previous year. The assessee-appellant submitted that these two oil tankerswere, in fact, challaned by Chakeri police on31st March, 1997, at 4.00 PM, at RamadeviChauraha. Copies of these challans wereproduced before the AO. The orders passedby the C.M.M., Kanpur, were also producedbefore it, but were not accepted on theground that these have been managed by theappellant-assessee. This approach of theauthorities below cannot be approved in theface of judicial order levying fine on theappellant-assessee. There is a presumption ofexistence of certain facts under Section 114of the Evidence Act. The Court may presumeunder Clause (e) of Section 114 of theEvidence Act (that) the judicial and officialacts have been regularly performed. The saidpresumption although is presumption of fact,could be rebutted on production of somecogent and relevant material and nototherwise. The authorities below clearlycommitted illegality in not drawingpresumption of challans of the vehicles inquestion on the last day of relevant previousyear. The judicial order passed by the criminalCourt cannot be ignored as has been done bythe authorities below, on speculation andsurmises. It is not possible to come to theconclusion in the absence of any contrary material that the judicial order was obtainedas 'stage show', the phrase used by theCIT(A) in the case in hand. 8.3 In Assistant Commissioner of Income Tax vs. Ashima SyntexLtd. (04.08.2000 – GUJHC), it has been held as under:- 26. In the instant case, the Revenue couldnot point out that there is no evidence beforethe Tribunal to arrive at the conclusion itreached or that the conclusion arrived at isinconsistent with the evidence and contraryto it. On the contrary, we are of the view thatthe Tribunal has properly appreciated andunderstood the facts and the law and haspassed an order in accordance with law. 31. From what is stated hereinabove, it isvery clear that in the instant case, as theTribunal found that the plant and machinerywere used and cloth was produced, that itselfwas sufficient to grant depreciation under theAct. 37. Thus, it is clear that the settled positionin law is that it is not necessary that themachinery must be used for a particularnumber of days so as to entitle it todepreciation, but it requires that it should beused for the purpose of business orprofession or vocation. The trial run of themachinery is obviously for the purpose ofbusiness and not for any other purposes.What is required to be seen that themachinery must be "used" for the purpose ofthe business and keeping in mind the widermeaning ascribed by various decisions ofvarious courts to the term "use", even trialproduction of a machinery would fall withinthe ambit of "used for the purpose ofbusiness". Further, as the statute does notprescribe a minimum time limit for "use" ofthe machinery, the assessee cannot bedenied the benefit of depreciation on theground that the machinery was used for avery short duration for trial run. 38. In the instant case, the Tribunal, onappreciation of evidence, arrived at aconclusion that plant and machinery was 38. In the instant case, the Tribunal, onappreciation of evidence, arrived at aconclusion that plant and machinery was used from March 26, 1993, till the end of theaccounting year, i.e., March 31, 1993. TheTribunal also found that grey cotton wasmanufactured and with the permission of theauthorities of Kandla Port Trust, the materialwas disposed of. Thus, use of machinery isnot in doubt. 39. We are, therefore, of the opinion thatwhen there is commencement of thebusiness by way of production of the articles,it can be said that the assessee is entitled todepreciation. 9.Regarding Question no.2 he has relied upon the decision ofCIT vs. Cermatic 9.1In Commissioner of Income Tax vs. Ceramic Industries and Ors. on 25.5.2017, it has been held as under:- 7. Taking into consideration the tribunal hasobserved as under: We have perused the facts of the case. Thelearned authorised representative Mr. H.M.Singhvi argued that the assessee hasproduced all the books of account, vouchersand the assessee's accounts are audited andall the production is subject to excise dutyand not even a single unit of production cango out of the factory without recording thesame in the excise registers which areregularly and continuously verified by theExcise Department and are under theircontrol. The Assessing Officer has notpointed out any defect in the purchases,sales, opening stock and closing stock and asexplained before the Assessing Officer andthe learned Commissioner of Income-tax(Appeals) that M/s. Bharat Potteries Ltd., i.e.,a sister concern is manufacturing more ofmaximum stoneware crockery and theassessee is manufacturing more of bonechina crockery and the difference in yield andthe wastage and the gross profit had beenexplained vide our letter dated March 26,2004 before the Assessing Officer andsimilarly the output/input ratio has also beenexplained before the Assessing Officerthrough the same letter and the Assessing Officer has not commented upon the sameand has not found out any defect in ourexplanation. The assessee has also filedbefore the Assessing Officer the followingdocuments/publications to support thewastage declared by the assessee isreasonable and according to the standardpractice adopted in the country as under: 1. C.G.C.R.I., Khurja (PB No. 13 to 1) 2. Publication of articles in white wares (P.B.No. 18) 3. Photocopy of hand book of Ceramics-Volume 2 (Editor S. Kumar) showing typicalcomposition of bone china. 4. Photocopy of the Chapter 5 of stonewarein the books published by the Institute ofMaterials (P.B. No. 21 to 22). In the report of CGCRI, Khurja, (refer P.B.No. 17), the waste worked out to 28.31 percent, to 38.7 per cent interest the bonechina crockery and in the case of stonewarecrockery it worked out to 24 per cent to34.8 per cent. We agree with the arguments of the learnedauthorised representative that the mainobjection raised by the Assessing Officer wasthat input/output ratio in various monthshas the inconsistency which has been dulyexplained by the assessee vide letter datedMarch 26, 2004 and the second objection bythe Assessing Officer was that the sisterconcern M/s. Bharat Potteries Ltd. hasdeclared more yield and more gross profit,has also been explained by the assesseevide the same letter dated March 26, 2004.Therefore, the inconsistency in theinput/output ratio in various months thereasons for which has been explained by theassessee, cannot be the basis for rejectionof books of account. The yield and grossprofit rate declared by the assessee can alsonot be the basis for rejection of books ofaccount since M/s. Bharat Potteries Ltd. is manufacturing maximum of stonewarecrockery and for many other reasons whichwere explained by the assessee vide itsletter dated March 26, 2004 which wasignored by the Assessing Officer and theAssessing Officer has not pointed out anyspecific defects in the purchases, sales,opening stock and closing stock of theassessee and the Assessing Officer has notbrought on record any cogent material toprove that the assessee has sold the under-production out of the books of account.Therefore, in such circumstances and factsof the case, the Assessing Officer is notjustified in rejecting the books of account byinvoking the provisions of section 145(3) ofthe Act and the additions made by theAssessing Officer are liable to deleted. Theobjection of the learned DepartmentalrepresentativethatthelearnedCommissioner of Income-tax (Appeals) hasnot relied upon the CGCRI report, Calcutta,the learned authorised representative haspointed out that in the same report it hasbeen mentioned that the said organisation isnot involved production practice and theyare not sure to what extent their opinion willbe useful for the purpose of the assesseeand in such circumstances and facts of thecase, the report of CGCRI, Calcutta alonecannot be the basis for rejection of thebooks of account and making an estimationof wastage and the learned Commissioner ofIncome-tax (Appeals) was not justified inignoring other material which was placedbefore him as mentioned hereinbefore.Therefore, the learned Commissioner ofIncome-tax (Appeals) was not justified insustaining the applicability of section 145(3)of the Act and addition of Rs. 11,15,087.Thus ground No. 1 of the assessee isallowed and the solitary ground of theRevenue is dismissed." 8. In our considered opinion the argumentwhich has been canvassed by Mr. Mathurthat the stone average loss as 29.4 shouldnot be 30.1 as per Khurja is also 23.1. 9. Taking into consideration that the boneschina crockery of the delicate nature, thereport of Khurja for the specific industry has been accepted by the Tribunal, no error iscommitted in doing so.10. Both the issues are answered in favourof the assessee and against the Department. 10.Regarding question 3, he has relied upon the followingdecisions:- 10.1 In Berger Paints India Ltd. vs. Commissioner of Income Tax,Calcutta (2004) 266 ITR 99 (SC) wherein Supreme Court held asunder:- 5. For the assessment year 1987-88, theTribunal allowed a similar claim and areference came to be made to the HighCourt in the following terms:- "Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law in directing the I.T.O. toallow the sum of Rs. 24,28,428/- beingCentral Excise and Customs duty underSection 43B of the Act on the ground thatthe said amount has been included in thevalue of closing stock?" The High Court by its judgment dated 6thFebruary 2002 disposed off both thereferences. The question referred in boththe references were answered in favour ofthe Revenue and against the assessee. Anapplication made for certificate to appeal tothis court under Section 261 of the Act wasrejected by the Calcutta High Court byobserving "we are unable ourselves toburden an already over burdened Hon'bleSupreme Court". Being aggrieved, theassessee impugns both judgments of theCalcutta High Court pertaining to the threeassessment years, by these appeals. 6. There is no doubt that the judgment ofthe Gujarat High Court in LakhanpalNational Ltd.'s case is completely in favour The High Court by its judgment dated 6thFebruary 2002 disposed off both thereferences. The question referred in boththe references were answered in favour ofthe Revenue and against the assessee. Anapplication made for certificate to appeal tothis court under Section 261 of the Act wasrejected by the Calcutta High Court byobserving "we are unable ourselves toburden an already over burdened Hon'bleSupreme Court". Being aggrieved, theassessee impugns both judgments of theCalcutta High Court pertaining to the threeassessment years, by these appeals. 6. There is no doubt that the judgment ofthe Gujarat High Court in LakhanpalNational Ltd.'s case is completely in favour of the assessee as it accepts the contentionof the assessee in toto. It is not in disputethat the decision in Lakhanpal NationalLtd.'s case was not challenged by thedepartment before this court and thus hasbeen accepted by the department. Theinterpretation placed on Section 43B inLakhanpal National Ltd.'s case was directlyfollowed by the judgment of the BombayHigh Court in CIT v. Bharat PetroleumCorporationLtd.,MANU/MH/0505/2001MANU/MH/0505/2001 : [2001] 252 ITR 43 and by the MadrasHigh Court in Chemicals and Plastics IndiaLtd.v.CIT,MANU/TN/1743/2002MANU/TN/1743/2002 : [2003] 260 ITR 193. These twojudgments also appear to have beenaccepted by the Revenue and have notbeen challenged before this court at all.This fact asserted before us by thepetitioner-assessee has not been disputedin the counter affidavit of the Department. 10.2 InCommissioner of Income Tax vs. Excel Industries Ltd.(2013) 358 ITR 295 (SC), it has been held as under:- 32. Thirdly, the real question concerningus is the year in which the Assessee isrequired to pay tax. There is no disputethat in the subsequent accounting year,the Assessee did make imports and didderive benefits under the advance licenceand the duty entitlement pass book andpaid tax thereon. Therefore, it is not as ifthe Revenue has been deprived of any tax.We are told that the rate of tax remainedthe same in the present assessment yearas well as in the subsequent assessmentyear. Therefore, the dispute raised by theRevenue is entirely academic or at bestmay have a minor tax effect. There was,therefore, no need for the Revenue tocontinue with this litigation when it wasquite clear that not only was it fruitless(on merits) but also that it may not haveadded anything much to the public coffers. 10.3 In The Commissioner of Income Tax and Ors. vs. NCRCorporation India Pvt. Ltd. (2016) 381 ITR 725 (KAR), it has beenheld as under:- 19. The first limb of argument that Section145A was not on the statute book at therelevant point of time and therefore thisCourt may take a different view by notholding that the matter is covered by thedecision of the Apex Court in case ofBerger Paints referred supra may requireconsideration of the effect of Section 43Bvis-à-vis Section 145A and to find out asto whether by insert