TaxTMI 
TaxTMI 
1998 (6) TMI 80
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....ng the order of the Commissioner of Income-tax (Appeals) holding that the assessee is entitled to investment allowance under section 32A of the Income-tax Act, 1961, even though the assessee is not engaged in the business of manufacture or production of any article or thing?" The assessee-company, Rensult Investment and Finance Pvt. Ltd., is engaged in the business of financing and leasing. In the previous year relevant to the assessment year 1985-86, it purchased certain machinery which was leased out to various parties. The assessee claimed investment allowance under section 32A of the Income-tax Act, 1961 ("the Act"), in respect of machinery leased out by it. This claim of the assessee was rejected by the Income-tax Officer on the gro....
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....ned counsel for the applicant, who submits that investment allowance under section 32A of the Act can be claimed by the assessee only in a case where he himself uses the machinery for the purpose of business of construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule. We have carefully considered the above submission. Section 32A of the Act, so far as is relevant, at the material time stood as under : "32A. Investment allowance.---(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with an....
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....e 31st day of March, 1976,--- (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule... (5) Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act--- (a) if the ship, aircraft, machinery or plant is sold or otherwise transferre....
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....e the sale or transfer of the ship, aircraft, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (6) or sub-section (7)." From a plain reading of the above section, it is clear that in order to get the benefit of investment allowance in respect of any machinery or plant, the assessee must prove that machinery was owned by him and that it was wholly used for the purposes of the business carried on by him. The assessee must also satisfy that the machinery or plant was installed in any industrial undertaking for the purpose of manufacture or production as specified in sub-section (2) of section 32A. In the instant case, there is no dispute about the fact that the machinery in respect of ....
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....enue preferred an appeal before the Supreme Court. The contention of the Revenue before the Supreme Court was that investment allowance could be claimed by the assessee only in a case where he was the owner of the machinery and used the machinery himself. In other cases, investment allowance could not be granted. The Supreme Court, on a perusal of the provisions of section 32A of the Act, decided against the Revenue and held that where the business of the assessee consisted of hiring out machinery and where income derived by him from the hiring of such machinery was his business income, he must be considered as having used the machinery for the purposes of its business. It was observed : "When the business of the assessee is leasing of s....