Investment allowance for boring machinery required factual findings on the purpose of underground water extraction before determination.

Investment allowance under section 32A depended on the factual purpose of the boring operations: if the machinery was used merely to extract underground water, admissibility could not be determined without a finding on that use, and the reference could not be finally answered on the existing record. The High Court directed that the Tribunal ascertain the true purpose of the boring and drawing of water from underground, and allow the parties to adduce evidence if they wished. The matter was therefore remitted to the Tribunal for fresh determination after recording the necessary factual findings.

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Issues: Whether investment allowance under section 32A of the Income-tax Act, 1961, was admissible on machinery used for boring operations to extract underground water, and whether the reference could be answered without a factual finding on the purpose of the boring.

Analysis: The material facts necessary to determine the nature and purpose of the boring operations were not available. Since admissibility of investment allowance depended on whether the boring was undertaken merely to extract water or for some other subterranean purpose, the question could not be finally answered on the existing record. The appropriate course was to have the Tribunal ascertain the purpose of boring and drawing water from underground and permit the parties to lead evidence if they so desired.

Outcome: The matter was sent back to the Tribunal for fresh determination of the question after recording the necessary factual findings.

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