COMMISSIONER OF INCOMETAX Vs. INDUSTRIAL PLANTS LTD

JUDGEMENT

(1.) IN this reference under S. 256(2) of the IT Act, 1961 ('the Act') for the asst. yrs. 1976-77 to 1979- 80 the following common question of law has been referred to this Court:

(2.) THE CIT (A) considered the contentions and the facts of the case as mentioned by the ITO. He found that the issue involved was a debatable point of law on which different opinions were possible. He was of the view that the ITO was not justified in applying S. 154, and, therefore, cancelled the order. The CIT (A) did not consider the contention of the assessee which was made on merit as he has allowed the claim of the assessee on legal ground.

(3.) AT the hearing before us contentions which were before the Tribunal have been reiterated. There is no dispute that in the factory a lock-out had to be declared by the employer. The question is, however, whether in such a case where the plant and machinery could not be worked because of the lock-out the assessee is entitled to the depreciation. There is a divergence of judicial opinion on this question. The Madras High Court, in the case of CIT vs. Vayithri Plantations Ltd. (1980) 19 CTR (Mad) 200 : (1981) 128 ITR 675, considered the decisions of the different High Courts. There the machinery was installed and kept ready for use but could not assessment used due to extraneous circumstances. The Madras High Court was of the view that the word 'used' would also be extended the passive user. In as much as the machinery which was kept ready could not be used for labour unrest, it should be taken that the machinery was in use as contemplated by the Act. After referring to the several decisions of the different High Court as well as the Supreme Court, the Madras High Court observed as follows: