Depreciation can be claimed on assets even if such assets are used for business purpose only for part of a year and hired out for the remaining period:

AO observed that the assessee had given certain plant and machinery on hire and earned rental income. AO took a view that since such assets were not used for assessee’s own business and hence, he disallowed proportionate depreciation in such assets given on hire. Hon’ble ITAT observed that it was not the case of Revenue that such assets given on hire were not at all used for assessee’s own business for a single day during the year under consideration. Instead of keeping such machinery idle, assessee hired out the same and earned rental income. Hon’ble ITAT was of the view that even if such machinery remained idle for part of the year, then also depreciation ought to have been allowed on such assets. The fact that such machinery had been rented out had no consequence on allowance of depreciation on machinery that had fallen within the block of assets for the year under consideration and used for the business purpose for part of the year. In light of the above, assessee’s claim of depreciation in such hired-out assets was allowed.

[JSIW INFRASTRCUTURE PVT. LTD. Vs. ACIT – ITA 348/Ahd/2013]