Court allows revision of assessment order under section 263, denies investment allowance for computer used in accounting.

The High Court held that the Commissioner had jurisdiction under section 263 to revise the assessment order, rejecting the doctrine of merger as not universally applicable. Additionally, the Court ruled against the assessee regarding the admissibility of investment allowance and additional depreciation on a computer used for accounting purposes, stating that the computer did not qualify as it was not directly employed in the manufacturing process. The Revenue prevailed in both issues, and the Tribunal's decision in favor of the assessee was overturned.

---

---

Issues Involved:
1. Jurisdiction of the Commissioner to revise the assessment order.
2. Admissibility of investment allowance and additional depreciation on a computer used for accounting purposes.

Issue 1: Jurisdiction of the Commissioner to Revise the Assessment Order

The Tribunal was questioned on whether the Commissioner had jurisdiction to revise the assessment order. The assessee argued that the assessment order had merged with the appellate order of the Commissioner of Income-tax (Appeals), thus nullifying the Commissioner's power to revise under section 263. The Tribunal initially held that the Commissioner had no right to revise the order of assessment. However, the High Court referred to several precedents, including the Supreme Court's decision in *State of Madras v. Madurai Mills Co. Ltd., AIR 1967 SC 681*, which clarified that the doctrine of merger is not universally applicable and depends on the nature of the orders. The High Court concluded that the doctrine of merger does not apply to matters not considered in appeal, affirming the Commissioner's jurisdiction under section 263 to revise the assessment order on issues not addressed by the appellate authority.

Issue 2: Admissibility of Investment Allowance and Additional Depreciation

The second issue was whether the assessee was entitled to investment allowance and additional depreciation on a computer used for accounting purposes. The Tribunal had ruled in favor of the assessee, stating that the computer, though not part of the manufacturing machinery, was used for business purposes and thus qualified for allowances. The High Court, however, disagreed, stating that for investment allowance and additional depreciation to be admissible, the computer must be used for the purpose of business of manufacture or production of any article or thing. The Court referenced the Bombay High Court's decision in *CIT v. IBM World Trade Corporation [1981] 130 ITR 739* and concluded that the computer used for accounting did not qualify as it was not directly employed in the manufacturing process. Therefore, the High Court held that the Tribunal was not justified in granting the allowances.

Conclusion:

The High Court answered both questions in the negative, ruling against the assessee and in favor of the Revenue. The Commissioner was deemed to have jurisdiction under section 263 to revise the assessment order, and the investment allowance and additional depreciation on the computer used for accounting purposes were not admissible. There was no separate judgment delivered by the judges.

---