Law:

Section:

Section 32(1)(ii) of the Income-tax Act, 1961 read with rule 5(1) of the Income-tax Rules, 1962 [as they stood on 1-4-1964]-Depreciation-Allowance/Rate of-Assessee-company constructed a building for installing a new plant - Machinery installation completed prior to 1-3-1965 but commenced functioning for business purposes on 7-3-1965-Assessee claimed depreciation in assessment year 1965-66 relevant to accounting year ending 31-3-1965-Whether impugned building could bb said to have been used for business for more than one month and was therefore eligible for depreciation-Held, on facts, no as mere preparation for user could not amount to user Facts The assessee, an existing company, had erected a building for installing a new plant for manufacturing dyestuffs and pigments. The installation of the machinery was completed before 1-3-1965, but the machinery started functioning only with effect from 7-3-1965. For the assessment year 1965-66 (accounting year ending 31-3-1965), the assessee claimed depreciation on the building since it was used for the purposes of business for more than one month. While the ITO and the AAC disallowed the same, the Tribunal accepted it on the view that the date on which the machinery became functional was irrelevant and that the only date relevant was when the machinery was installed in the building. On reference by the revenue, the assessee contended that the installation of machines had to precede their operation and the user had therefore, commenced on the date of completion of their installation. Held To get benefit under section 32(1 ), read with rule 5(1), the assessee must establish that the building in question was used for the purpose of his business during the relevant period. Mere preparation for the user cannot amount to user. There must be actual, effective and real user in the commercial sense and there should be imme-diate nexus between the user and the real business. Depreciation allowance is not permissible for natural wear and tear by reason of the aging process. Every building must have started aging from the day it was constructed but depreciation cannot be claimed in that behalf by way of compensation for such…

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