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1998 (8) TMI 18 - HC - Income Tax

Issues:
- Interpretation of item No. 12 of the Eleventh Schedule in the context of investment allowance under section 32A of the Income-tax Act for the manufacture of electrical bulbs.

Analysis:
The case involved a dispute regarding the eligibility of an assessee for investment allowance under section 32A of the Income-tax Act for the plant and machinery used in the manufacture of electrical bulbs. The primary contention was whether electrical bulbs could be considered domestic electrical appliances falling under item No. 12 of the Eleventh Schedule, thereby affecting the entitlement to investment allowance.

The assessee, a company manufacturing electrical bulbs, claimed investment allowance based on the cost of plant and machinery. The Income-tax Officer initially disallowed the claim, but the Commissioner of Income-tax later allowed it, leading to subsequent appeals. The Tribunal ultimately held that electrical bulbs did not fall under domestic electrical appliances as per item No. 12 of the Eleventh Schedule, thereby ruling in favor of the assessee's eligibility for investment allowance.

The court delved into the legal provisions of section 32A of the Income-tax Act and item No. 12 of the Eleventh Schedule to determine the scope of investment allowance. Section 32A outlined the conditions for investment allowance, specifying that certain machinery or plant installations may qualify for a deduction. Item No. 12 defined domestic electrical appliances as those typically used in households or similar settings, excluding them from investment allowance eligibility.

In analyzing the term "domestic electrical appliances," the court emphasized that such appliances were primarily intended for household use or similar environments like hotels, restaurants, and hospitals. The court rejected the Revenue's argument that any appliance capable of rendering a service could be considered domestic, citing precedents that clarified the specific usage context required for classification.

The court distinguished previous judgments cited by the Revenue, highlighting that the legislative intent behind item No. 12 was to restrict the definition of domestic electrical appliances to those exclusively used for domestic purposes. The court referenced dictionary definitions of "domestic" to support its interpretation, emphasizing the confinement of the term to home-related contexts.

Ultimately, the court upheld the Tribunal's decision, affirming the assessee's entitlement to investment allowance for the plant and machinery involved in manufacturing electrical bulbs. The judgment favored the assessee, concluding that electrical bulbs did not qualify as domestic electrical appliances under the specified criteria, thereby allowing for the investment allowance claim.

In conclusion, the court's detailed analysis of the legal provisions, precedents, and the specific usage context of electrical bulbs led to a ruling in favor of the assessee's eligibility for investment allowance under section 32A of the Income-tax Act.

 

 

 

 

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