Court denies investment allowance to assessee for boiler erection as immovable property.

The court denied the assessee's entitlement to investment allowance under section 32A(2)(i)(iii) of the Income-tax Act for the assessment year 1979-80. The court held that the erection of boilers by the assessee, intended to be permanently fixed, constituted immovable property, thus excluding it from the investment allowance benefit. The decision was based on the interpretation that the term "construction" in the relevant section does not cover activities like erection work. The court ruled against the assessee, emphasizing that the machinery used for erecting boilers did not qualify for the investment allowance.

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Issues:
Entitlement to investment allowance under section 32A(2)(i)(iii) of the Income-tax Act for the assessment year 1979-80 based on the nature of the activity carried out by the assessee.

Analysis:
The judgment pertains to the entitlement of investment allowance under section 32A(2)(i)(iii) of the Income-tax Act for the assessment year 1979-80. The question at hand is whether the assessee, engaged in the business of erection work, is entitled to the investment allowance based on the nature of its activities. The Tribunal described the activities of the assessee, which involve various processes like fabrication, welding, and erection of structures like boilers, piping, and structural works. The Tribunal noted that the boilers erected by the assessee are meant to become a part of the plant and machinery of the industrial undertaking. It was highlighted that the activity of erection of the boiler does not amount to the "construction of a thing" as per recent decisions of the apex court.

The judgment references the case law of CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 and Builders Associations of India v. Union of India [1994] 209 ITR 877 to establish that the term "construction" in the relevant section does not encompass activities like ship building or erection work. The apex court clarified that the terms "articles" and "things" are used interchangeably, and the word "construction" in the context of the section does not refer to construction activities in the ordinary sense. The court emphasized that the term "article" is typically movable, and this interpretation applies to the section in question.

Furthermore, the judgment cites the case of Mohammed Ibrahim v. Northern Circars Fibre Trading Co., AIR 1944 Mad 492, which emphasizes that the intention of the parties and the object of annexation are crucial in determining whether a property fixed to earth is movable or immovable. Additionally, the judgment refers to the case of South Indian Bank Ltd. v. V. Krishna Chettiar and Bros., AIR 1976 Mad 215, which outlines tests to determine when a movable property affixed to earth becomes immovable.

Applying these legal principles to the case at hand, the court concluded that the erection of the boiler was intended to be fixed permanently, making it immovable property. Therefore, the assessee is not entitled to the investment allowance on the machinery used for erecting boilers. The court's response to the question referred was in the negative, denying the benefit of investment allowance to the assessee for the machinery used in the erection activities. No costs were awarded in the circumstances of the case.

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