Surinder Singh, J.
1. This reference initiated by the Revenue against the decision of the Income-tax Appellate Tribunal, Amritsar Bench (camp at Chandigarh), has been forwarded by the Tribunal to this court under Section 256(1) of the I.T. Act, for expression of opinion on the following question which has been formulated :
'Whether, on the facts of the case, the Appellate Tribunal was right in law in holding that the depreciation allowance should have been made in respect of the building at Chandigarh while computing the business income of the assessee for the assessment year 1971-72 ?'
2. The facts as mentioned in the statement of the case are that the respondent-assessee is an HUF which was carrying on business of a printing press under the name and style of Gemini Printers, Ambala Cantt., during the assessment year 1971-72 (accounting year April 1, 1970, to March 31, 1971). The assessee declared his income as Rs. 58,711. At the time of the assessment before the ITO, the assessee claimed depreciation of Rs. 10,743 in respect of written down value of the factory building at Chandigarh and certain electrical fittings therein. It is not disputed that the factory building in question was purchased by the assesses on November 27, 1970. The claim for depreciation was, however, disallowed by the ITO on the ground that the said building had not been actually used in the accounting year, referred to above. The ITO assessed the income of the respondent for the assessment year in question at Rs. 1,10,060.
3. The respondent-assesses preferred an appeal before the AAC, but he failed to get any relief from that quarter. The assessee then approached the Income-tax Appellate Tribunal which allowed his appeal, holding that as the building at Chandigarh had been purchased by the assessee for shifting his business of printing press from Ambala to Chandigarh and the purchase had been made for the purpose of his business, he was entitled to the depreciation claim in respect of the said building and the electrical installations therein. That is how the present reference was initiated by the Revenue to this court.
4. In so far as the facts are concerned, as already noted, there is no dispute inter se the parties. The respondent had purchased the new factory building at Chandigarh on November 27, 1970. The learned counsel for the parties are further agreed at the bar that the assessee shifted from Ambala to the new building at Chandigarh on September 30, 1971. The only bone of contention in the present reference is as to whether the respondent can be allowed to claim depreciation in respect of the building and theelectrical fittings for the period November 22, 1970, to March 31, 1971, i.e., a little over four months.
5. The argument addressed by the learned counsel for the parties revolved around the interpretation of the word 'used' occurring in Section 32(1) of the I.T. Act. According to the said provision, an assessee can claim depreciation in respect of the buildings, machinery, etc., owned by the assessee and used for the purpose of his business. Mr. Ashok Bhan, learned counsel for the Revenue, has contended that the word 'used' connotes actual user of the building and in support of his argument, he has sought to place reliance upon certain observations in CIT v. Jiwaji Rao Sugar Co. Ltd. : 71ITR319(MP) . A reference to the said authority would indicate that the same pertains to the case of machinery and not a building. The use of machinery involves a set of circumstances different from that of a building. In this authority, the decision of the Supreme Court in Liquidators of Pursa Ltd. v. CIT : 25ITR265(SC) , was also noticed and a reference to the said authority would amplify that their Lordships of the Supreme Court, though deciding the question regarding the use of the machinery or plant for the purpose of business, left the interpretation of the word 'used' open, in so far as it pertained to the difference between an active or passive use. This difference has indeed been highlighted in CIT v. Viswanath Bhaskar Sathe : 5ITR621(Bom) , but then the said authority again relates to the case of machinery and not a building. There being no direct authority relating to the case of a building, the matter will have to be considered on first principles.
6. It is a matter of common knowledge that when a new unit is required to be set up, it involves a number of procedural formalities before the stage of 'turn key', as is technically termed. The procedure for setting up the unit would naturally commence with the arrangement of a suitable building to house the same. This would be followed by installation of electrical or other fittings to provide the source of energy for the unit. The installation of machinery would be the next step and thereafter the manpower, technical or non-technical, to run the unit would have to be arranged. The provision for raw material would come next. In addition, the legal formalities required under various statutory provisions would have to be complied with and then alone the stage would arrive for the actual functioning of the unit. The procedure referred to above is bound to take considerable time, depending of course upon the nature and capacity of the industry and the capital outlay of the unit. The question which falls for consideration is that after a building has been arranged for housing the proposed industry and the necessary electrical fittings have been carried out, can it be said that the building has not been put to use? After hearing the learned counsel for the parties at considerablelength, we find that it is not so. If the contention of the learned counsel for the Revenue that it is only when the unit actually starts functioning that the building can be said to have been used, is accepted, it would lead to illogical results. Let us test the contention to examine its mettle. For the sake of argument, we may visualise a case where an entrepreneur makes arrangements for the building, instals the electrical and other fittings as also the machinery required, and even engages the necessary manpower for running the unit. However, when the unit is all set for actual functioning, there is a sudden non-availability of the required raw-material or some other unforeseen circumstance occurs, with the result that though the entrepreneur has thrown all his investment into the business, but on account of the said circumstance, he is not able to put the unit into operation for a certain period which may extend to the next financial year. In such a situation, would it be reasonable to hold that the entrepreneur is not entitled to claim any depreciation in respect of the building which housed his unit, merely on account of the nonavailability of raw material or some other circumstances referred to above. Our answer to the question posed is definitely in the negative and the reason for this conclusion is simple. After arranging for the building, any steps taken by the entrepreneur to set the building into gear for running the unit, would be nothing but putting it to 'use'.
7. On the legal proposition, Mr. Bhagirath Dass, learned counsel for the respondent-assessee has also placed reliance upon the observations in Sarabhai Management Corporation Ltd. v. CIT : 102ITR25(Guj) , which are of some assistance to the determination of the point involved in this reference. The case pertained to a private limited company, whose main object was to acquire immovable property and give it out either on lease or licence, for the purpose of residence or business, with all appurtenant amenities including storage, watch and ward facilities, canteens, refreshment rooms, etc. In the said case, the assessee had claimed depreciation in respect of the building and other amenities pertaining to the period in which the building was in the process of preparation for being leased, as above. It was held by a Bench of the Gujarat High Court that the assessee would be entitled to claim depreciation for the said period. The facts of the present case, though not absolutely akin, are quite similar as the respondent-assessee after purchase of the building at Chandigarh had installed electrical fittings to run the unit. As already noticed, the respondent was able to shift his business into the said building within a few months. There is thus no difficulty in holding that during this transitory period, the building purchased by the assessee had been 'used'.
8. As a result of the above discussion, we answer the question referred to this court in the affirmative, i.e., in favour of the respondent-assessee and against the Revenue. In the circumstances of the case, there shall be no order as to costs of this reference.