1999 (3) TMI 72 - HC - Income Tax

Investment Allowance Manufacture Rubber Stoppers New Machinery Industrially Backward Area

Summary

Issues:
Interpretation of Eleventh Schedule to the Income-tax Act, 1961 regarding investment allowance for plant and machinery used in manufacturing rubber stoppers.

Analysis:
The case involved a dispute over the eligibility of an assessee-company engaged in manufacturing rubber stoppers to claim investment allowance under the Income-tax Act, 1961. The company claimed investment allowance for new machinery used in its business for two assessment years. The Income-tax Officer denied the claim, stating that the company's products fell under items 27 and 28 of the Eleventh Schedule, which included crown corks and pilfer-proof caps. The Commissioner of Income-tax (Appeals) and the Tribunal upheld the Income-tax Officer's decision, leading to the matter being brought before the High Court for opinion.

The key issue before the court was whether rubber stoppers used by the company could be classified under items 27 and 28 of the Eleventh Schedule. The Department argued that the rubber caps functioned similarly to cork caps used to seal bottles airtight and watertight, falling under the mentioned items. On the other hand, the assessee contended that the rubber caps were easily removable and not insulated with steel, thus not meeting the criteria of pilfer-proof caps or other fittings specified in the Schedule.

The court examined the nature of the rubber stoppers in question and considered how manufacturers of pharmaceutical or beverage products would perceive them. It was noted that the rubber stoppers, being easily removable without skill, did not qualify as pilfer-proof caps or other fittings as described in the Eleventh Schedule. The court also compared the Schedule's entries with similar entries in the Central Excise Tariff Act, 1985, and referred to a relevant judgment by the Gujarat High Court.

Ultimately, the court found merit in the assessee's argument, ruling that the rubber stoppers did not fall under the categories specified in items 27 and 28 of the Eleventh Schedule. As a result, the court answered the referred question in favor of the assessee, allowing them to claim the investment allowance for the plant and machinery used in manufacturing rubber stoppers. The judgment was delivered by the court, and both references were disposed of with no order as to costs.