2006 (11) TMI 110 - HC - Income Tax

Court rules wireless sets not office machines for investment allowance. Appliances aiding computer efficiency qualify.

The Court ruled in favor of the assessee, determining that wireless sets did not fall under the category of office machines or apparatus listed in the ... Assessee claim investment allowance in respect of the wireless sets manufactured by him – HC held that wireless sets are not covered under entry 22 and neither fall under negative list of items on which investment allowance not allowed, hence investment allowance is disallowed Issues:1. Manufacturing of wireless sets falling under item No. 22 of the Eleventh Schedule to the Income-tax Act, 1961.2. Allowing investment allowance under section 32A of the Income-tax Act, 1961, to a company engaged in the manufacturing of wireless sets.Analysis:1. The case involved a dispute regarding the eligibility of investment allowance claimed by an assessee engaged in manufacturing wireless sets. The Tribunal initially negatived the claim based on the Eleventh Schedule, item No. 22, which listed items not eligible for investment allowance under section 32A of the Income-tax Act, 1961. However, the Tribunal reversed its decision, citing a similar allowance in the previous assessment year.2. The Eleventh Schedule entry in question pertained to 'office machines and apparatus,' including various equipment for office work and data processing. The Madras High Court's interpretation in a related case emphasized that the term 'office appliance' should be strictly construed, limited to items exclusively or permanently used in an office, not elsewhere. The Court highlighted that appliances capable of being used in multiple locations may not qualify as office appliances for investment allowance purposes.3. The Court's analysis focused on the specific appliances claimed for investment allowance, such as intercoms, amplifiers, and air-conditioners. These were found to be installed in a computer room considered part of the factory, essential for the efficient functioning of computers. The Court emphasized that the eligibility for investment allowance depends on the installation location and purpose of the appliances. Considering the intercoms, amplifiers, and air-conditioners were used as adjuncts to computer operations, the Court concluded that they did not qualify as office appliances ineligible for investment allowance.4. Ultimately, the Court held that wireless sets did not fall under the category of office machines or apparatus listed in item No. 22 of the Eleventh Schedule, thereby ruling in favor of the assessee regarding both issues raised. The judgment highlighted previous decisions by other High Courts supporting a similar interpretation regarding the eligibility of appliances for investment allowance.5. Consequently, the Court answered the questions against the Revenue and in favor of the assessee, disposing of the reference accordingly. The judgment provided a detailed analysis of the relevant legal provisions and precedents to determine the eligibility of investment allowance for the specific appliances claimed by the assessee in the manufacturing of wireless sets.