Investment allowance denied for machinery put to use in prior year. CIT(A)'s decision upheld.

The Tribunal upheld the CIT(A)'s decision, confirming that the machinery was first put to use in the previous year relevant to the assessment year 1987-88. Therefore, the appellant was not entitled to the investment allowance in the assessment year 1988-89, and the appeal was dismissed.

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Issues Involved:
1. Rejection of the claim for investment allowance.
2. Determination of the year in which the machinery was first "put to use."

Issue-Wise Detailed Analysis:

1. Rejection of the Claim for Investment Allowance:
The appellant contested the rejection of their claim for an investment allowance amounting to Rs. 15,45,06,722. The primary argument was that the plant and machinery were put to use during the assessment year 1988-89, thus entitling them to the investment allowance. The appellant relied on the sequence of events and the assertion that commercial production began only in the assessment year 1988-89. The CIT(A) upheld the Assessing Officer's decision, stating that the machinery was installed and put to use in the previous year relevant to the assessment year 1987-88, as evidenced by the trial run conducted in December 1986.

2. Determination of the Year in Which the Machinery Was First "Put to Use":
The Tribunal examined the sequence of events provided by the appellant, which indicated that individual machineries were tested in December 1986, and the plant as a whole was tested on 4-1-1987, with the first trial production available on 12-1-1987. The appellant argued that the investment allowance should be granted in the year when commercial production starts, citing the decision in Madhusudan Vegetable Products Co. Ltd. v. IAC. However, the Tribunal noted that the Directors' report to the shareholders for the year ending 31-12-1986 stated that trial production had started towards the end of 1986, and commercial production began by mid-January 1987. The Tribunal emphasized that the machinery was "put to use" when it produced any kind of output, whether trial or commercial. The consumption of raw materials worth Rs. 68.79 lakhs in the trial run further supported this conclusion.

The Tribunal dismissed the appellant's argument that the investment allowance should be allowed in the assessment year 1988-89 due to the absence of a profit and loss account for the assessment year 1987-88. It was held that the grant of investment allowance does not depend on the drawing of a profit and loss account but on the actual use of the machinery. The Tribunal also rejected the appellant's reliance on various judicial decisions, stating that the facts of the present case did not support the appellant's claim.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the machinery was first put to use in the previous year relevant to the assessment year 1987-88, and thus, the appellant was not entitled to the investment allowance in the assessment year 1988-89. The appeal was dismissed.

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