JUDGMENT P. Krishna, J.
1. The Income-tax Appellate Tribunal, Delhi, at the instance of the Income-tax Department has referred the following question of law under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court :--
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in allowing the claim of depreciation of Rs. 1,91,917 on the plant and machinery of vegetable ghee unit as these were not actually used for the full year relevant to the assessment year 1977-78 ?"
2. The assessee is a limited company running a sugar factory, distillery, confectionery and vanaspati units. It did not operate the plant during the accounting year relevant to the assessment year 1977-78. But it claimed depreciation on plant and machinery on vegetable ghee unit. The claim was rejected by the Income-tax Officer to the extent of Rs. 1,91,917 as the plant and machinery was not actually used for the full year in respect of the vegetable ghee unit. In appeal this part of the order was set aside by the Commissioner of Income-tax (Appeals). The Tribunal has confirmed the order of the Commissioner of Income-tax (Appeals) on this point.
3. Heard learned counsel for the Department and Shri Vikram Gulati for the assessee-respondent. It was submitted by learned standing counsel that the Tribunal was not justified in allowing the normal depreciation at Rs. 1,91,917 on the plant and machinery which was not actually used during the year. Elaborating the argument it was submitted that for claiming depreciation the asset must be used during the whole or at least some part of the accounting year. The machinery and plant was not used at all in the previous year relevant to the assessment year in question and as such no depreciation under Section 32 of the Act could be allowed. We find no merit in the aforesaid submissions. The findings recorded by the Tribunal are that the vanaspati unit though was not actually in use but it was kept ready for use. There was no intention on the part of the assessee in the relevant assessment year to close the business of the vegetable ghee unit. The directors were making efforts to restart the vegetable ghee factory as soon as possible. There was no intention to close the said unit but on account of adverse circumstances, the said unit remained suspended and could not be operated in the year in question. The unit resumed production in the subsequent assessment year i.e., in July, 1978.
4. The apex court while interpreting Section 32 of the Act, has held in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775, that Section 32 confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It is also settled that where there are two possible interpretations of a taxing provision, the one which is favourable to the assessee should be preferred. Two requirements to claim depreciation under Section 32 of the Act are : (i) the asset should be owned by the assessee, and (ii) it should be used for the purposes of business or profession. The Supreme Court has preferred to give a wide meaning to the term "owned" following its earlier judgment given in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625, in which it has been held that anyone in possession of the property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufructs in his own right would be the "owner" of the building though the formal deed of title may not have been executed or registered as contemplated by the Transfer of Property Act and the Registration Act, etc.
5. In Machinery Manufacturers Corporation Ltd. v. CIT [1957] 31 ITR 203 the Bombay High Court has observed that the expression "used" in Section 10(2)(vi) of the Indian Income-tax Act, 1922, corresponding to Section 32 of the Act, has to be given wider meaning. The expression includes passive as well as active user. It has been judicially held in a number of cases that depreciation might be allowed in certain cases even though the machinery was not in use or was kept idle. The words "used for the purposes of business" are capable of larger and narrower interpretation. If the expression used is construed strictly, it can be taken as connoting or requiring the active requirement or actual working of the machinery, plant or building in the business. On the other hand, the wider meaning will include not only cases where the machinery and plant, etc., are actively implied but also the cases where there is what may be described as passive user of the same in the business and the same can be said to be in use when it is kept ready for use. The Delhi High Court in CIT v. Refrigeration and Allied Industries Ltd. [2001] 247 ITR 12, has held that the assessee was entitled to depreciation allowance on the cold storage plant though the machinery had not actually worked during the accounting period.
6. The Punjab and Haryana High Court in CIT v. Pepsu Road Transport Corporation [2002] 253 ITR 303 has held that the assessee who was the transporter had to keep spare engines in the store, was entitled for depreciation on spare engines in the store, as the engines were meant to be used in the case of need. There is a normal depreciation of value even when machines or equipment is merely kept in the store. Looking to the nature of business of that assessee, who was a transporter it was held that keeping spare engines in store to meet emergent situations, was the requirement of business.
7. In Income-tax Application No. 58 of 2001 Anil Bulk Carrier (P.) Ltd. v. CIT decided on October 26, 2004, we have held that the asset ready for use, but not actually used is also entitled for depreciation, under Section 32 of the Act.
8. In view of the foregoing discussions, we find that the view taken by the Tribunal is legally justified.
9. In the result the question of law referred to us is answered in the affirmative i.e., against the Revenue and in favour of the assessee. But no order as to costs.