Law:

Section:

Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deduction to be allowed only on actual payment - Whether furnishing of bank guarantee can be treated as equivalent to actual payment - Held, no - Whether bottling fee payable under the Rajasthan Excise Act, 1950 is covered by section 43B - Held, no Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 1992-93 - Whether it is requirement of section 32 that depreciation claim in respect of any asset has to be allowed only if it continues to be used for all purposes for which it was being used earlier - Held, no - Assessee claimed depreciation in respect of its research and development assets/division - Assessing Officer disallowed claim holding that two fast food divisions and three restaurants of assessee had been closed since assessment year 1988-89 - Whether since research and development division of assessee was alive and all businesses of assessee were not closed, depreciation ought to have been allowed to assessee as deduction as part of block of assets of research and development division - Held, yes FACTS The assessee claimed depreciation in respect of its research and development (R&D) assets/division. The Assessing Officer disallowed the claim holding that two fast food divisions and three restaurants of the assessee had been closed since the assessment year 1988-89 and, therefore, the assessee's claim for depreciation pertaining to research and development assets could not be allowed in view of the provisions of section 32, which require that the assets on which depreciation is claimed must be used in a live business during the accounting period relevant to the assessment year in question. On second appeal, the Tribunal accepted the assessee's claim and allowed the depreciation. On appeal to High Court, the assessee submitted (i) that its R & D assets did not relate solely to its fast food division but also related to the manufacture and sale of liquor and R&D division was also rendering services for its liquor business and the liquor business had not been closed at any stage and (ii) that since amendment of section 32 with effect…

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