Karnataka H.C : The machinery had not been used by the assessee for undertaking any manufacturing of its own could not be a ground for denying investment allowance to the assessee

High Court Of Karnataka

CIT vs. Maharashtra Apex Corporation Ltd.

Sections 32(1), 32A

Asst. Year 1983-84

G.C. Bharuka & Chidananda Ullal, JJ.

IT Ref. Case No. 12 of 1995

9th June, 1997

JUDGMENT

G.C. BHARUKA, J. :

The Tribunal has sent a statement of case as required by this Court under s. 256(2) of the IT Act, 1961 (in short “the Act” only), on the following two questions of law :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in upholding the order of the CIT(A) directing the ITO to allow investment allowance on the ground that the mere fact that the machinery had not been used by the assessee for undertaking any manufacturing of its own could not be a ground for denying investment allowance to the assessee ?

2.Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in upholding the order of the CIT(A) directing the ITO to allow extra shift allowance on the ground that it did not matter whether the assessee who had used the machinery in double shift in one of its own concerns or whether it was the lessee who had used the machinery in double shift in his own concern ?”

The facts of the case are simple and short. The assessee was engaged in the business of leasing of machinery during the previous year pertaining to the asst. yr. 1983-84. It had purchased new textile machinery and leased out the same to others who utilised the same for manufacturing/production of textile goods. Under these circumstances, the assessee claimed both investment allowance under s. 32A of the Act as well as extra shift allowance under s. 32 of the Act, but the said claims were disallowed by the assessing authority on the sole ground that the machines acquired and owned by the assessee had not been used for the purpose of his own manufacturing or production. On an appeal, the CIT(A) directed the ITO to allow the said claims. The appeal to the Tribunal by the Department proved to be futile, which upheld the claims of the assessee. Under these circumstances, we are required to answer the questions noticed above. Sec. 32A of the Act provides for grant of investment allowance. It, inter alia, provides that if any plant or machinery as referred to in sub-s. (2) thereof is owned by the assessee and is wholly used for the purposes of the business carried on by him there shall, in accordance with and subject to the provisions of this section, certain deduction will be allowed.

In the context of the language employed in the said section, the question which needs to be considered is whether the expression “wholly used for the purposes of business carried on by him” has to be construed as wholly used for the purposes of business of manufacturing carried on by him or the section should be allowed to have its natural meaning, i.e., wholly used for the purposes of business carried on by him of any nature.

In our opinion, it requires no authority to substantiate that if any of the statutory provisions is plain and unambiguous admitting of no second meaning then no rule of interpretation needs to be employed. It is also well settled that while construing a fiscal statute if any doubt is entertained about the meaning of any provision having bearing on tax liability then it should be resolved in favour of the taxpayer. Analysing the provisions of s. 32A of the Act by keeping at the forefront the said rules of interpretation, we do not find any good reason to take the view that the assessee who has acquired the ownership of certain plant and machinery during the previous year will be entitled to the investment allowance only if he himself carries on the business of manufacturing or production by use of such machinery. In our opinion, the section should be construed in the context of modern times and having regard to various modes of business currently adopted by the businessman. Giving plant and machinery on lease or hire is one of the recognised modes of doing business. Even in the present case, the income earned by the assessee by hiring plant and machinery has been assessed under the head “Income from business” and not under “Income from other sources”. Therefore, we are constrained to hold that the assessee is entitled to the investment allowance as claimed by him and approved by the Tribunal.

7. The view taken by us is squarely covered by the judgment of a Division Bench of this Court in the case of CIT vs. Shaan Finance (P) Ltd. (1993) 109 CTR (Kar) 209 : (1993) 199 ITR 409 (Kar) : TC 28R.222. Similar view has been taken by the Allahabad High Court, Madhya Pradesh High Court and Calcutta High Court, respectively, in the cases of Ajodhya Prasad Tara Chand Khekra vs. CIT (1967) 66 ITR 576 (MP) : TC 28R.344; Smt. Kavit Sanghi vs. CIT (1982) 133 ITR 48 (MP) : TC 28R.353 and in the case of CIT vs. Steel Rolling Mills of Hindustan (P) Ltd. (1986) 51 CTR (Cal) 386 : (1987) 164 ITR 633 (MP) : TC 28R.331.

8. So far as the claim of the extra shift allowance is concerned, as already noticed by us, s. 32(ii) of the Act provides for grant of depreciation. This section, inter alia, provides that in respect of depreciation of machinery, plant, etc., owned by the assessee and used for the purpose of business or profession certain deduction will be admissible. The basic requirement for claiming this deduction as well is the same as for claiming the investment allowance dealt with by us in the foregoing paragraphs. Therefore, for those very reasons, we hold that the assessee is entitled for extra shift allowance as well.

Accordingly, we answer both the questions in the affirmative and in favour of the assessee and against the

Department. In the circumstances, there will be no order as to costs.

[Citation : 234 ITR 484]

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