COMMISSIONER OF INCOME TAX Vs. PINNACLE FINANCE LTD

JUDGEMENT

(1.) THE following questions have been proposed by the appellant-Revenue stated to arise out of the Tribunal's order dt. 13th March, 2002 in ITA No. 3614/Ahd/1995:

(2.) THE assessment year is 1992-93 and the relevant accounting period is year ended 31st March, 1992. THE assessee is a company carrying on business of financing, investment, leasing, etc. THE assessee-company leased one boiler to M/s Anil Starch Products and claimed depreciation of Rs. 16,18,444. THE said claim was disallowed by the AO as, according to the AO, the asset was not used either by the assessee-company or the lessee. Alternatively the AO held that the boiler in question was not a high efficiency boiler and hence, was eligible only @ 40 per cent depreciation. THE assessee carried the matter before the CIT(A) and succeeded on the aspect of allowability of depreciation. THE CIT(A) did not give any decision as consequence in relation to rate of depreciation.

(3.) THE principal contention raised on behalf of the Revenue was that the use contemplated by s. 32 of the IT Act, 1961 (for short 'the Act'), was actual user and only then allowance which would be in the nature of the deduction for wear and tear could be granted to the assessee. In relation to the decision in the case of Shaan Finance (P) Ltd. (supra) the submission was that the same pertains to allowability of investment allowance under s. 32A of the Act, and the said section employed a language different from the provision of s. 32 of the Act. It was submitted by Mr. Bhatt that S. 32A of the Act talked about machinery or plant owned by the assessee and wholly used for the purpose of the business carried on by him while s. 32 of the Act talked about the asset specified in the said section as being owned by the assessee and used for the purpose of the business. Thus, according to Mr. Bhatt, the difference was that for the purpose of investment allowance the asset had to be used for the purpose of business carried on by him and this later portion was absent in S. 32 of the Act. Mr. Bhatt also placed reliance upon the concept of user as being a necessary element before depreciation could be allowed as a deduction.