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M/S J.S. Indust v. C.I.T. - INCOME TAX REFERENCE No. 45 of 1989  RD-AH 296 (1 February 2005)
Income Tax Reference No.45 of 1989
M/s Janta Sugar Industries, Lakhimpur Kheri
v. Commissioner of Income Tax, Lucknow
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"1.Whether the Tribunal was legally correct in holding that the assessee firm was not entitled to investment allowance under Section 32-A?
2.Whether the Tribunal was justified in law in holding that the assessee was entitled to depreciation on electric generator only @ 10% instead of 30% as claimed by the assessee?"
The reference relates to the Assessment Year 1983-84.
Briefly stated, the facts giving rise to the present reference are as follows:-
The applicant is a registered firm and was running a sugarcane crusher. During the year under consideration, some addition to the machinery was made on which investment allowance was claimed. The Income Tax Officer had disallowed the claim on the ground that the machinery to the extent of Rs.64,356/- has not been put to use during the year under consideration. The applicant has also claimed depreciation on the generator which was allowed at 10% by the Income Tax Officer. Feeling aggrieved, the applicant preferred an appeal before the Commissioner of Income Tax (Appeals) who allowed the same and directed the Income Tax Officer to allow the claim for investment allowance after verification. He also enhanced the depreciation on the generator from 10% to 30%. Feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals), the Revenue preferred an appeal before the Tribunal. The Tribunal has allowed the appeal of the Revenue by holding that the words "and is wholly used for the purpose of the business carried on by him" occurring in the said provision are significant and they connote the idea that investment allowance is to be allowed only when the machinery is used for the purposes of business carried on by the assessee. The Tribunal has further held that depreciation on generator is admissible at the rate of 10% only and not on 30% as allowed by the Commissioner of Income Tax (Appeals).
We have heard Sri Satish Mandhyan, learned Standing Counsel for the applicant, and Sri Ashok Kumar, learned Standing Counsel appearing for the respondent.
We find that under Section 32A(1) of the Act investment allowance is admissible in respect of machine or plant in the previous year in which it was installed. Putting it into use is not a precondition for grant of investment allowance. The Calcutta High Court in the case of Commissioner of Income Tax v. Surama Tubes (P) Ltd., (1993) 201 ITR 124 has held that neither section 32(1)(iia) nor section 32A requires that the machinery or plant has to be put into use in the year in which it is acquired for the purpose of claiming additional depreciation allowance or investment allowance. It will be evident that what is relevant and material is the year of acquisition in the case of ships or aircraft and the year of installation in the case of machinery or plant. If the installation of a plant is spread over more than a year, the relevant year for the grant of allowance would be the year in which the installation is completed. As in the case of investment allowance, so also in the case of additional depreciation, the material date is the date of installation and not the year of acquisition.
We are in respectful agreement with the view taken by the Calcutta High Court and, therefore, hold that the applicant was entitled to investment allowance in respect of machinery installed in the previous year relevant to the year under consideration.
So far the depreciation on generator is concerned, generator is not specifically specified in the Appendix I relating to table of rates on which the depreciation is admissible and, therefore, the general rate of 10% is admissible. This Court in a series of decisions viz. Income Tax Reference No.179 of 1987, Commissioner of Income Tax, Agra v. M/s Allcozine Alloy Casting, Aligarh, decided on 9.11.2004 and Income Tax Reference No.232 of 1988, Commissioner of Income Tax, Agra v. M/s Indian Metal Industries, Agra, decided on 7.12.2004, has held that the depreciation on generator is admissible only at 10%.
We, therefore, answer the question no.1 in the negative, i.e., in favour of the assessee and against the Revenue and the question no.2 is in the affirmative, i.e., in favour of the Revenue and against the assessee. In view of the divided success, there shall be no order as to costs.
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