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[2007] 164 Taxman 567 (Punjab & Haryana)/[2009] 311 ITR 24 (Punjab & Haryana)/[2007] 212 CTR 505 (Punjab & Haryana) [2007] 164 TAXMAN 567 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA Commissioner of Income-tax, Karnal* v. Piccadily Agro Industries Ltd. M.M. KUMAR AND AJAY KUMAR MITTAL, JJ. IT APPEAL NO. 362 OF 2006 AUGUST 6, 2007 Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of - Assessment year - 1996-97 - Whether where assessee had commenced trial production after setting up plant during accounting year relevant to assessment year in question, it could be said that machinery or plant was used by assessee for purposes of business and, therefore, assessee was entitled for depreciation - Held, yes FACTS The assessee derived income from manufacturing and sale of sugar, etc. The trial production of sugar after setting up of the plant was commenced on 23-2-1996. The assessee consumed raw material in the form of sugarcane and shown manufacturing expenses. The assessee filed its return for the assessment year 1996-97 claiming depreciation. The Assessing Officer allowed the assessee's claim. However, the Commissioner passed an order under section 263 setting aside the assessment made by the Assessing Officer under section 142(3) on the ground that the assessee was not entitled to depreciation because it had not started commercial production of sugar during the relevant period and directed the Assessing Officer to pass fresh order after disallowing the depreciation. On appeal the Tribunal set aside the order of the Commissioner holding that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. On appeal: HELD A perusal of the provision of section 32 shows that depreciation is allowable by granting deductions in respect of building, machinery, plant, etc., to the assessee if it is used for the purpose of business or profession. It was not disputed that production of sugar had commenced on 23-2-1996 and the assessee had consumed raw material in the form of sugarcane worth Rs. 2,80,71,662 and had shown manufacturing expenses of Rs. 20,88,295. On the bare interpretation of section 32, it could…

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