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T. Banusekar

OURS is a civil engineering construction company with operations all over India, assessed at Chennai. During the previous year 1999-2000, we purchased a machine costing Rs 92 lakh from a manufacturer in Bangalore. The machine comes as a completed assembled unit and can be put to use, as soon as delivery is taken. The machine was delivered at Bangalore on March 30, 2000 and transported by land to one of our other sites where it reached on April 4, 2000. Depreciation has been claimed on the machine for the assessment year 2000-2001 (relevant to previous year 1999-2000).

The assessing officer has disallowed this depreciation on the ground that the machinery has not been actually put to use in the previous year. We, however, are of the view that our claim of depreciation is allowable, as delivery has been taken of the machinery on March 30, 2000; and since the machine is fully assembled and ready for use, it should be considered that the asset has been used passively for the year ended March 31, 2000.

Kindly clarify if it would make any difference because we have a branch office at Bangalore where the machinery was taken delivery?

S. M. Madhu

Reply

Depreciation cannot be claimed in the assessment year 2000-2001. Though it has been held in a number of cases that when an asset is ready for use, the claim for depreciation is allowable, it was found that the machinery was kept ready for use at any moment. The word, `used' has been interpreted to include the passive use of the machinery as well. It is true that a view has been taken that the claim for depreciation did not depend on the actual working of the machinery so long as the machinery was in a state of readiness for use.

It is required that the machinery be used for the purpose of the business, the profits of which are assessable to tax. If the machinery had been kept ready for use and could not have been used due to reasons, such as labour unrest, lack of business and so on, the claim of depreciation would be allowable. In the instant case, however, the asset had not been installed and kept ready for use but had only been delivered to the user and transported in the previous year. It is, therefore, felt that the claim for depreciation in this case would not be in order. It would make no difference even if the assessee company has a branch office in Bangalore where the delivery was taken.

Query

I have already availed of a housing loan and purchased a house with it. I now propose to take another loan to purchase/construct another house. Will I be entitled to claim a deduction in respect of interest payment on the new housing loan? Will I also be entitled to claim rebate on the repayment of principal for the new housing loan?

V. Umashankar

Reply

The reader can claim deduction in respect of interest payment of the new housing loan under Section24 in computing income from house property, subject to the limits prescribed under the section if the property is self-occupied. The reader will also be entitled to claim rebate under Section 88 in respect of the principal repayment of the housing loan. It may be noted that the Finance Bill, 2002 proposes that rebate will not be available in respect of individuals and HUF's whose gross total income before Chapter VIA deductions is more than Rs 5 lakh.

Query

I had availed of a housing loan during the year 1998. The construction of the house property is completed but the house is neither self occupied nor let out. Can I claim the deduction in respect of interest paid on the housing loan without any ceiling limit? Will a deemed income be treated as income from house property in this case?

I. S. Jayakumar

Reply

It is not possible to answer the query directly, as the reason for the property not being let or occupied is not stated in the query. If a property is self-occupied, the income from such property would be taken as `nil' and interest would be allowed as a deduction subject to the following limits:

(a) Rs 30,000

(b) If the property is purchased or constructed with capital borrowed on or after April, 1999 and if the purchase or construction is completed before April 1, 2003, up to Rs 1,50,000.

A property is taken as self-occupied if:

(a) It is occupied by the owner for his own residence or

(b) It cannot be actually occupied by the owner because of his business or profession being in a place other than in the place where the building is situated.

In such cases, the property is taken as self-occupied provided:

(a) the house is not let at any time during the previous year;

(b) no other benefit is derived from the property by the owner;

An assessee may, however, claim only one property to be self-occupied even if he is in occupation of more than one property.

In the reader's case if the property is not actually occupied, because of his business or profession being in a place other than in the place where the building is situated, the income from house property would be taken as nil.

Similarly, if the property were vacant because of reasons, such as not being able to locate the tenant, etc., the annual value would normally be taken as nil.

If the property were treated as self-occupied, the deduction in respect of interest would be subject to the above referred limits.

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