CIT Vs. LAKSHMIJI SUGAR MILLS LTD.

JUDGEMENT

(1.) THESE appeals by the Revenue under section 260A of the Income Tax Act, 1961 pertain to the assessment years 2002 -03, 2005 -06 and 2006 -07 and are directed against the order dt. 13 -4 -2011 passed by the Income Tax Appellate Tribunal (tribunal, for short). Learned counsel for the appellant -revenue submits that assessing officer has rightly disallowed the claim of depreciation on the ground that the sugar mill had stopped functioning and was not in operation. It is submitted that the mill could not have been put into operation as it was incapacitated by lack of funds etc.

(2.) WE have examined the said contention but do not find any merit in the same. For the assessment year 2002 -03, the assessing officer observed that the assessees mill/factory had remained closed during the year under consideration. The assessing officer refers to the reply furnished by the assessee. In the reply it was stated that efforts were made for revival and restarting the company and subsequently, mill/factory re -started on 19 -12 -2006. Before the assessing officer, the respondent assessee had submitted as under: - - The machineries installed at the Sugar Mill are very ready machineries which are to be kept at all time in working condition because of the seasonal industries. The production can be commenced at any time when they will get clearance and working capital funds. Machineries are to be kept in working condition at all time so that the production can be started without loss of time in the season period. The machineries since have to be kept in working condition, therefore, the claim of depreciation is justified and the company has accordingly claimed the depreciation on machineries. Similar other assets were also being kept ready and therefore, the claim of depreciation may be allowed to the appellant company. In this connection, we wish to bring to your kind notice that to start machineries specially in the sugar mill, if they are not kept ready for production, takes a minimum 2 to 3 months time to start which is very much costly for the sugar mill during the season time which is hardly 4 to 5 months are required to commence it and therefore, the machineries have to be kept at ready and in working so as to commence the production without any loss of time. Under these circumstances, the claim of depreciation is justified.

(3.) THE Commissioner (Appeals) and the tribunal, having considered the factual background of the present case, have come to the conclusion that the machinery was actually and in fact ready for use and hence depreciation is to be allowed. The findings recorded by the tribunal read as under: - -