1. For the assessment year 1965-66, the following question has been referred to this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 154 of the Income-tax Act, 1961, could not be invoked for reducing the depreciation allowed in completing the assessment originally ?'
2. The facts of the case are that the assessed was carrying on business in Chemicals and ethyl alcohol. In the assessment order, the depreciation on plant and machinery was allowed to the full extent. An objection was raised by the Revenue audit, which led the ITO to issue a show-cause notice. As a result of the objection, some changes were made in the assessment order, one of these being that the depreciation allowance for plant and machinery was reduced to Rs. 37,997 and (the difference) added back to the total income. The reason for this was that, according to the ITO, the plant and machinery was not used during the period form December, 1964, to March, 1965, because during this period the company did not deal in alcohol. The period of the user according to the authorities was only three months, so depreciation had to be allowed at half the rates. On a consideration of the annual reports of the assessed company, the AAC was also of the opinion that depreciation had to be allowed at half the rates for three months only during the assessment year.
3. The Tribunal, in disposing of the second appeal, came to the conclusion that the plant and machinery situated at Kandla was always ready for use, but restrictions by the Government had resulted in the non-user. There was no discontinuance of activity, but the non-user was due to extraneous circumstances. It may be convenient to quote form paragraph No. 7 of the Tribunal's order, where it was stated that the Revenue audit note was drafted without knowing all the data concerned with the Government's restrictions regarding the ban in the export of alcohol. The Tribunal stated as follows :
'But it must be remembered that at no time the company discontinued any activity. It was only switching on form one to another as opportunity arose. but the common denominator is that the plant and machinery was always kept in readiness for such use, that it could be put to use depending on the variable Government policies and economic conditions as were obtaining form time to time. Probably, there was no active use of the machinery in the first few months of the year. But active use is not an essential criterion for an assessed to be entitled to depreciation.'
4. Then the Tribunal referred to various judgments.
5. The Tribunal came to the conclusion that active and passive use of machinery both equally entitled the assessed to depreciation.
6. Section 32 of the Act provides that depreciation allowance is to be allowed to the assessed for plant and machinery, etc., used for the purpose of the business.
7. The authority cited by the Tribunal shows that the passive user, i.e., in the sense that plant and machinery is used, but could not be used for some other purpose, has also been treated as user for the purpose of the business. Without going into the correctness of this judgment, it can be seen that the point was debatable, and, hence, not amenable to an order for rectification under s. 154 of the Act.
8. We would accordingly answer the question referred to us in the affirmative, i.e., the Tribunal was right in holding that the provisions of s. 154 of the I.T. Act, 1961, were not attracted to the case. We leave the parties to bear their own costs.