Investment allowance for dredgers upheld where dredging operations were treated as ship operation and produced marketable fine sand.

Investment allowance under section 32A was considered available for a dredger used in the assessee's business, because the dredging operations involved drilling, digging, washing, cleaning and screening that produced a distinct marketable commodity, fine sand. The Tribunal also noted that from 1 April 1985 the depreciation rules treated dredgers as ships, supporting the view that dredgers were legislatively regarded as ocean-going ships for depreciation purposes. On those facts, the dredger was treated as being used in the business of operation of ships, and the assessee succeeded on entitlement to investment allowance.

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Issues: Whether investment allowance under section 32A was allowable on a dredger used in the assessee's business for the assessment year 1985-86, having regard to the amended depreciation schedule treating dredgers as ships.

Analysis: The Tribunal examined the nature of the assessee's dredging activity and held that the dredger was used not merely to lift sand but to carry out a series of mechanical operations of drilling, digging, washing, cleaning and screening, by which a distinct marketable commodity, namely fine sand, emerged. It was also noted that with effect from 1 April 1985 the depreciation rules included dredgers in the category of ships, showing legislative treatment of dredgers as ocean-going ships for depreciation purposes. On the facts found, the assessee's dredger was used in the business of operation of ships and the earlier Tribunal view was distinguishable.

Conclusion: Investment allowance on the dredger was allowable and the assessee was entitled to succeed on the issue.

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