High Court Of Allahabad
CIT vs. Raj Vijay Corporation
Section 32A
Asst. Year 1986-87
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 179 of 1992
23rd March, 2005
Counsel Appeared
A.N. Mahajan, for the Revenue : None, for the Assessee
JUDGMENT
By the court :
The Tribunal, Delhi, has referred the following question of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), for opinion to this Court :
“Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the investment allowance was allowable to the assessee under s. 32A on generator ?”
2. The reference relates to the asst. yr. 1986-87.
3. Briefly stated, the facts giving rise to the present reference are as follows : The respondent-assessee has been assessed to income-tax in the status of a registered firm. It is engaged in the business of manufacturing and sale of surgical and plastic products. It has installed a generator costing Rs. 96,955 and claimed investment allowance. The AO disallowed the investment allowance on generator on the ground that it is not a machinery for the purpose of manufacturing, etc. as it is only used for generating electricity which is the substitute of power. Feeling aggrieved, the respondent preferred an appeal before the CIT(A). The CIT(A) has allowed the claim by following the earlier order dt. 16th Sept., 1987, relating to the asst. yrs. 1984-85 and 1985-86. The order of the CIT(A) has been upheld by the Tribunal.
4. We have heard Sri A.N. Mahajan, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee.
5. The learned standing counsel submitted that as the generator has not been used for the purpose of manufacture or production of any article or thing, it is not plant or machinery falling under s. 32A of the Act and thus investment allowance was not admissible. The submission is misconceived. Sec. 32A of the Act provides investment allowance which has been enacted by the Parliament to encourage the industrialisation of our country. Sub-s. (1) of s. 32A of the Act provides for allowing investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant of the assessee. However, second proviso to the said section provides that deduction is not admissible to any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house, any office appliances or road transport vehicles, plant or machinery or ship in respect of which the deduction by way of development rebate has been allowed or where the actual cost of which is allowable as deduction by way of depreciation or otherwise while computing the income chargeable under the head ‘Profits and gains of business or profession’ of any one previous year. Sub-s. (2) of s. 32A of the Act specifies the ship or aircraft or machinery or plant eligible for investment allowance of which relevant portion is reproduced below : “(2) The ship or aircraft or machinery or plant referred to in sub-s. (1) shall be the following, namely : (a) ….. (b) any new machinery or plant installed after the 31st day of March, 1976,— (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking or the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule.”
From a reading of sub-cl. (ii) of cl. (b) of sub-s. (2) of s. 32A of the Act reproduced above, it is clear that any machinery or plant which has been installed for the purpose of business of manufacture or production of any article or thing not falling under the second proviso to s. 32A of the Act is entitled for investment allowance. The words ‘business of manufacture or production’ is a very wide term and would encompass the whole set of machinery and plant which is used for the purpose of manufacture of any article or thing. Thus, the generator which is used in the business of manufacture or production of any article or thing by the assessee clearly falls within the aforesaid clause and the Tribunal has rightly upheld allowance of the investment allowance.
In view of the foregoing discussions, we answer the question referred to us in the negative, i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
[Citation : 278 ITR 348]
