1983 (2) TMI 111 - AT - Income Tax

Tribunal Grants Investment Allowance for Plant and Shed, Overturning AAC Decision

Universal Steel Alloys. Versus Income-Tax Officer.

The Tribunal allowed the appeal in favor of the assessee, overturning the AAC's decision and granting the investment allowance on the plant and shed as ... Investment Allowance Issues:- Claim of investment allowance on plant and shed- Interpretation of the term 'plant' for investment allowanceAnalysis:The case involves an appeal filed by an assessee against the order of the AAC regarding the claim of investment allowance under section 32A(1) of the Income-tax Act, 1961. The assessee, a registered firm deriving income from polishing turmeric, claimed investment allowance on a total sum of Rs. 1,45,433, including the cost of machinery, electric fittings, and plant and shed. The ITO allowed the investment allowance only on the cost of machinery and electric fittings, leading to a dispute. The AAC dismissed the appeal, stating that the condition for qualification of the allowance under section 32A(ii) required the installation of the plant, which did not include the building or shed according to the AAC's interpretation.The matter was brought before the Tribunal, where the assessee argued that the shed should be considered part of the plant based on its functional role in the business. The Tribunal considered the test laid down by Kanga and Palkhivala's Law and Practice of Income-tax, which states that a building can be considered a plant if it is an apparatus with which the business is carried on. By analyzing the structure of the shed where turmeric dolls were installed and the vibration and wear and tear it endured during the manufacturing process, the Tribunal concluded that the shed was used as an apparatus integral to the business operations, thus qualifying as a plant.The Tribunal relied on the decision of the Madras High Court in Addl. CIT v. Madras Cements Ltd., where it was established that structures like reinforced foundations and fencing could be considered as part of the plant. Citing various other cases where buildings or structures were treated as plants for investment allowance purposes, the Tribunal allowed the investment allowance on the value of the plant and shed, totaling Rs. 1,03,652, resulting in an investment allowance of Rs. 36,358. Consequently, the Tribunal allowed the appeal in favor of the assessee, overturning the AAC's decision and granting the investment allowance on the plant and shed as claimed by the assessee.