1993 (7) TMI 335 - HC - Income Tax

Summary

Issues Involved:
1. Investment allowance u/s 32A(2)(b)(iii) for machinery used in coal excavation.
2. Applicability of Explanation 2 of section 139(8) regarding interest for late filing of return.

Summary:

Issue 1: Investment Allowance u/s 32A(2)(b)(iii)
The primary issue was whether the Tribunal was justified in allowing investment allowance u/s 32A(2)(b)(iii) for machinery used in coal excavation by the assessee. The assessee, a partnership firm, employed new machinery for coal mining operations and claimed investment allowance. The ITO disallowed the claim, arguing that the assessee was not an industrial undertaking and was merely letting out machinery on hire. The Commissioner (Appeals) and the Tribunal, however, upheld the assessee's claim, stating that the machinery was operated by the assessee's employees and used for coal extraction, thus qualifying for investment allowance.

The Court referred to previous judgments, including Aluminium Corpn. of India Ltd. v. Coal Board and Empire Industries Ltd. v. Union of India, which established that raising coal constitutes production of an article. The Court also noted that coal is treated as a produced article in various statutes, including the Central Excises and Salt Act, 1944, and other mineral-related legislations. The Court concluded that the assessee's activities amounted to production and thus qualified for the investment allowance.

Issue 2: Interest u/s 139(8)
The second issue was whether the Tribunal was justified in observing that Explanation 2 of section 139(8) could not be invoked when no tax was payable by a registered firm on the basis of its completed assessment. The ITO had levied interest for late filing of the return, treating the assessee as an unregistered firm. The Commissioner (Appeals) and the Tribunal held that no interest could be charged since the assessee had paid more than the assessed tax and obtained a refund.

The Court referred to the Supreme Court's decision in Ganesh Dass Sreeram v. ITO, which clarified that if the advance tax paid covers the entire assessed tax, no interest is chargeable even if the return is filed late. The Court remanded the matter to the Tribunal to ascertain the correct facts and dispose of the issue accordingly.

Conclusion:
The first question was answered in the affirmative, in favor of the assessee, confirming the entitlement to investment allowance. The second question was remanded to the Tribunal for further factual determination, with no order as to costs.