1993 (3) TMI 152 - AT - Income Tax

Tribunal Upholds CIT Decision on Investment Allowance for Leased Machinery

The Tribunal upheld the decision of the CIT (Appeals) allowing investment allowance for leased machinery used in the assessee's business of leasing ... Investment Allowance Issues:Allowance of investment allowance on leased machinery.Analysis:The revenue contested the allowance of investment allowance on leased machinery, arguing that the assessee did not utilize the machinery for manufacturing or production, thus not entitled to the investment allowance. The CIT (Appeals) referred to a decision by the Madras Bench of the Appellate Tribunal, which allowed investment allowance for leased machinery used by others for specified purposes.The Departmental Representative highlighted the Supreme Court's observation in Mahabir Cold Storage case, emphasizing the need for unity of ownership and user of the asset in the business of the assessee to claim investment allowance. The Calcutta High Court's decision in CIT v. S. P. Jaiswal Estates (P.) Ltd. was also cited to emphasize the requirement of ownership and user unity for investment allowance.The assessee relied on the Karnataka High Court's decision in CIT v. Shaan Finance (P.) Ltd., distinguishing between sections 32A and 33 and allowing investment allowance for leased machinery if the business is leasing machinery on hire-purchase.The Tribunal differentiated the present case from the Supreme Court and Calcutta High Court decisions, noting that the assessee's business was leasing machinery, making the Supreme Court's observation inapplicable. Citing the Karnataka High Court's decision, the Tribunal upheld the CIT (Appeals) decision, stating that investment allowance was rightly allowed for the leased machinery used in the business of the assessee. The assessee's appeal was partly allowed, while the revenue's appeal was dismissed.