High Court denies investment allowance to construction company in tax case

The High Court ruled against the assessee-company, a State Government concern engaged in construction activities, in a case concerning the entitlement to investment allowance under section 32A of the Income-tax Act, 1961 for the assessment year 1980-81. Citing a precedent from the Apex Court, the High Court held that the assessee did not qualify as an industrial undertaking eligible for the investment allowance. Consequently, the claim for investment allowance was disallowed, and the decision favored the revenue. No costs were awarded in this judgment.

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Issues:
Whether the assessee-company is entitled to investment allowance under section 32A of the Income-tax Act, 1961 for the assessment year 1980-81.

Analysis:
The Income-tax Appellate Tribunal referred the question of law to the High Court regarding the entitlement of the respondent-assessee, a State Government concern assessed as a Corporation engaged in construction activities, to claim investment allowance on plant and machinery under section 32A of the Income-tax Act, 1961. The Assessing Officer disallowed the claim, but the appellate authority directed to allow the investment allowance, a decision upheld by the Tribunal.

During the hearing, the learned counsel for the revenue cited the decision of the Apex Court in CIT v. N.C. Budharaja & Co. [1993] 204 ITR 4121, where it was established that an undertaking involved in construction activities does not qualify as an industrial undertaking nor produces any article or thing to be eligible for investment allowance under section 32A of the Act. Consequently, the respondent-assessee was deemed ineligible for the investment allowance.

The High Court, based on the precedent set by the Apex Court, answered the question of law in the negative, ruling in favor of the revenue and against the assessee. It was concluded that the respondent-assessee did not meet the criteria to claim investment allowance under section 32A of the Income-tax Act, 1961 for the assessment year 1980-81. No costs were awarded in this judgment.

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