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Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 1992-93 - Whether when assessee bona fidely installs any machinery and to his misfortune, it becomes defective and non-functional, it cannot be said that it has not been put into use for purpose of business, may be installation might have entailed loss to him - Held, yes - Whether in such a situation assessee would be entitled to depreciation on such machinery - Held, yes CASE REVIEW Dy. CIT v. Yellamma Dasappa Hospital [2007] 290 ITR 353/ 159 Taxman 58 (Kar.) [Para 4]distinguished. CASES REFERRED TO Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265 (SC) [Para 2] and Dy. CIT v. Yellamma Dasappa Hospital [2007] 290 ITR 353/ 159 Taxman 58 (Kar.) [Para 3]. M.V. Seshachala for the Appellant. B.C. Thiruvengadam for the Respondent. JUDGMENT 1. The respondent-assessee, a Company running a sugar factory for the assessment year 1992-93, installed Pollution Control machinery as per mandate of the Pollution Control Board. The assessee sought for depreciation to the extent of the value of the machinery installed. The Assessing Officer found that the machinery that was installed was found to be defective during the trial runs, therefore, held that the machinery was not used for the purpose of business as required under section 32 of the Income-tax Act. The Assessing Officer has rejected the request for depreciation. The Commissioner of Income-tax and the Tribunal, in the Appeals, have held that the assessee is entitled to depreciation because the machinery was installed and merely because it did not effectively function is not a ground to reject the depreciation. 2. The State is in appeal against the order of depreciation. Sri M.V. Seshachala, learned counsel for the appellants relied on the decision of the Hon'ble Supreme Court in Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265. The following observation is made by the Hon'ble Supreme Court: ". . . Indeed, the position has been made clear and placed beyond any doubt by the subsequent amendment of 1946 which added the word 'such' in clause (vii ). The words 'used for the purposes of the business' obviously mean used for the…

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