2005 (8) TMI 40 - HC - Income Tax

Tribunal Decision Upheld: Investment Allowance Eligibility Confirmed for Integrated Plant

The court upheld the Tribunal's decision, confirming the eligibility of investment allowance on electric installations, transformers, and A.C. plant for ... 'Whether Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) allowing investment allowance on the electric installation, transformers and A.C. plant?' - finding recorded by the Commissioner of Income-tax (Appeals) and the Tribunal concurrently holding that the three items form part of a consolidated manufacturing plant remains undisturbed and there is no material brought on record to dislodge the said finding - Revenue having not even attempted to make a case that the said plant and machinery was used for any other purpose, there is no infirmity in the impugned order of the Tribunal so as to merit interference - question referred for the opinion of this court is, therefore, answered in the affirmative, that is to say, the Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) - question is, accordingly, answered in favour of the assessee and against the Revenue Issues:Whether the Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) allowing investment allowance on electric installation, transformers, and A.C. plantRs.Detailed Analysis:The case involved a question referred under section 256(1) of the Income-tax Act, 1961, regarding the eligibility of investment allowance on specific machinery installed during the relevant accounting period. The assessee claimed investment allowance on machinery costing Rs. 86,37,475, including items like electric installations, transformers, and an A.C. plant. The Assessing Officer disallowed investment allowance on these specific items, stating they were separate self-contained units not integral to the manufacturing process of art silk. The Commissioner of Income-tax (Appeals) upheld the assessee's claim, and the Tribunal dismissed the departmental appeal against this decision.The Tribunal found that for investment allowance eligibility under section 32A of the Act, it was not mandatory for each item of machinery to be directly involved in the manufacturing process. As long as the machinery was used for the business purpose of manufacturing art silk cloth, it qualified for the investment allowance, provided other conditions were met. The Tribunal confirmed that all the machinery in question was indeed used for the business of manufacturing art silk cloth and other products.The Revenue contended that all machinery claimed for investment allowance must be wholly and directly used for manufacturing, arguing against the approach taken by the Commissioner (Appeals) and the Tribunal. On the other hand, the respondent-assessee argued that all machinery was integrated into a single unit essential for manufacturing, and no production was possible without this integrated setup.The court examined the findings and concurrence of the Commissioner of Income-tax (Appeals) and the Tribunal that the disputed items formed an integrated plant necessary for manufacturing, and they were not operable independently. The court noted that the Revenue did not raise any specific prohibitions or challenges under section 32A against the eligibility of the machinery. Consequently, the court upheld the decision of the Tribunal, stating that there was no basis to interfere with the findings that the machinery formed a consolidated manufacturing plant and was used solely for the business purpose of the assessee.In conclusion, the court answered the referred question in the affirmative, confirming the Tribunal's decision to allow investment allowance on electric installations, transformers, and A.C. plant. The judgment favored the assessee, and the reference was disposed of without any costs incurred.