1996 (11) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to investment allowance u/s 32A for electrical installations, air-conditioning plant, and voltage stabiliser.
2. Validity of claiming investment allowance for AY 1984-85 through rectification application.

Summary:

Issue 1: Entitlement to Investment Allowance u/s 32A
The court examined whether the assessee, engaged in developing exposed cinematographic films and making positive prints, was entitled to investment allowance u/s 32A. The Revenue argued that the assessee's activities fell under item No. 9 of the Eleventh Schedule, which includes "cinematograph films and projectors," thus disqualifying them from the allowance. The court, however, noted that the term "cinematograph film" refers to a film containing picture and sound fit for exhibition, which is different from the positive prints made by the assessee. The court concluded that the process of making positive prints from negatives is an independent activity and does not constitute the production of a cinematograph film. Therefore, the assessee was entitled to the investment allowance. The court upheld the Tribunal's decision, affirming that the items in question (voltage stabiliser, electrical equipment, and air-conditioner) were indeed plant and machinery used in the business, thus qualifying for the allowance.

Issue 2: Validity of Claiming Investment Allowance for AY 1984-85 through Rectification Application
For AY 1984-85, the assessee sought rectification to claim investment allowance, which was initially omitted. The court noted that the assessment was completed as "N.A." (not assessable) and since there were no profits, the investment allowance was to be computed for carry forward purposes. The Tribunal referenced the Gujarat High Court's decision in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63, which emphasized the responsibility of the Income-tax Officer to inform the assessee of any reliefs they were entitled to but had omitted to claim. The court also cited the Supreme Court's ruling in CIT v. Manmohan Das [1966] 59 ITR 699, stating that an initial decision on carry forward losses is not binding in subsequent profitable years. Thus, the court found the Revenue's objection frivolous and upheld the Tribunal's decision allowing the rectification application.

Conclusion:
The court answered both reframed questions in the affirmative, favoring the assessee and dismissing the income-tax case. The Tribunal's decision to grant investment allowance and allow rectification for AY 1984-85 was upheld.