1993 (3) TMI 80 - HC - Income Tax

Summary

Issues:
1. Interpretation of whether the assessee was entitled to initial depreciation under section 32(1)(vi) of the Income-tax Act.
2. Determination of whether the assessee qualified as a small scale industrial undertaking under Explanation (3) to section 32(1)(vi) of the Act.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the entitlement of the assessee-company to initial depreciation under section 32(1)(vi) of the Act. The assessee, engaged in electrical installation contracting and manufacturing of electrical products, claimed initial depreciation as an "industrial company" and a small scale industrial undertaking. The Income-tax Officer initially rejected the claim, but the Appellate Assistant Commissioner accepted it, leading to an appeal by the Revenue to the Income-tax Appellate Tribunal (Tribunal).

The Tribunal considered two submissions by the Revenue: whether the assessee was an industrial company and if it qualified as a small scale industrial undertaking. The Tribunal upheld the finding that the assessee was an industrial company based on its manufacturing activities and a liberal interpretation of the term. Regarding the second submission, the Tribunal excluded certain items like motor cars, trucks, cycles, typewriters, and calculators from the calculation of machinery and plant value, determining the assessee qualified as a small scale industrial undertaking under Explanation (3) to section 32(1)(vi).

The Revenue sought to refer two questions to the High Court, but the Tribunal only referred the question related to the small scale industrial undertaking status, as the industrial company status had become final. The High Court analyzed the relevant provisions, emphasizing the exclusion of office appliances and road transport vehicles from the definition of machinery or plant under section 32(1)(vi). The court held that the items excluded by the Tribunal could not be considered as plant and machinery, thus supporting the Tribunal's decision on the eligibility of the assessee for initial depreciation.

In conclusion, the High Court affirmed the Tribunal's decision, ruling in favor of the assessee regarding the entitlement to initial depreciation under section 32(1)(vi) of the Act. The court found no error in the Tribunal's interpretation of the provisions and held that the assessee qualified as a small scale industrial undertaking.