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In the case of CIT v. Union Carbide (I) Ltd. (254ITR488) the assessee running existing business had set up two new plants at J&k and Hyderabad as part of the expansion exercise. One of the Plant had gone into trial production during the previous year, although not into commercial production. The Calcutta High Court held that once it is shown that the asseseee has put the machinery to use, for the purpose of the assessee’s business, then further inquiry about the degree or type of use is not permitted to be scrutinized by the language of the section.

The High Court further made a remarkable note in this case in pointing out that in the case of a running business seeking further expansion the trials are sufficient test for claiming depreciation. The Court thus made specific reference to the words “ for the purpose of business” having specific significance in an expansion case.

Further sub section (6) of section 80I overrides even section 80AB of the Act and therefore the previous adverse rulings of the Madras and Calcutta High Court on this subject reported elsewhere do not hold much water on the present date.

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