2006 (9) TMI 152 - HC - Income Tax

Summary

Issues involved:
The judgment addresses the denial of investment allowance on an effluent treatment plant, specifically focusing on whether the plant qualifies for investment allowance under section 32A of the Income-tax Act, 1961, and whether the plant's installation date affects the eligibility for the allowance.

Issue 1: Investment Allowance on Effluent Treatment Plant
The appellant claimed investment allowance on the effluent treatment plant installed in its IMFL unit, which was disallowed by the assessing authority. The Appellate Commissioner and the Tribunal upheld the disallowance, considering the plant as an integral part of the machinery used for manufacturing alcoholic liquor. The appellant argued that section 32A and section 32A(2C) of the Act support their claim for the investment allowance. The court analyzed the provisions of section 32A, emphasizing the conditions for claiming investment allowance and the restrictions under the Eleventh Schedule, which lists items ineligible for the allowance. The court highlighted the significance of section 32A(2C), introduced in 1983, which provides a higher allowance for machinery assisting in pollution control or environmental protection installed between 1983 and 1987. The court concluded that the appellant was entitled to a 25% investment allowance for the pollution plant, installed after April 1, 1987, and remanded the matter to the Tribunal to determine if the plant falls within the notification criteria of August 1, 1984.

Issue 2: Eligibility Based on Installation Date
The court addressed the argument regarding the installation date of the pollution plant and its impact on claiming investment allowance. The Revenue contended that granting any concession should relate back to 1976, which the court rejected, stating that section 32A(2C) only allows benefits for plants installed after May 31, 1983. The court emphasized that the legislative intent behind section 32A(2C) was to encourage environmental protection, and any denial of benefits would go against this objective. The court highlighted the necessity for the Tribunal to consider the notification criteria of August 1, 1984, to determine the plant's eligibility for the investment allowance. Ultimately, the court partially allowed the appeal, answering the questions of law in favor of the assessee, subject to the Tribunal's verification of the plant's alignment with the notification requirements.

Conclusion:
The court's judgment focused on interpreting the provisions of section 32A and section 32A(2C) to determine the eligibility of the effluent treatment plant for investment allowance. By emphasizing the legislative intent behind the provisions and the importance of environmental protection, the court granted the appellant a 25% investment allowance, subject to further verification by the Tribunal.