2012 (9) TMI 841 - SC - Income Tax

Investment allowance u/s 32A(2)(b)(iii) - Refrigerator Cooking Range and Fans installed in its Factory Canteen - Held that - The Canteen may be a part of production Unit or Factory however it cannot fall under sub-clause (iii) which refers to any other industrial undertaking for the purposes of business of construction manufacture or production of any article or thing not being an article specified in the Eleventh Schedule. The Canteen cannot be said to be an industrial undertaking as it does not manufacture or produce any article or thing as required under clause (iii). disallowance u/s 32A(2)(b)(iii) warranted - in favour of revenue.

Summary

Issues:
1. Claim for investment allowance under Section 32A of the Income Tax Act, 1961 for equipment in the canteen.
2. Working out the disallowance under Rule 6D of the Income Tax Rules, 1962.

Issue 1: Claim for Investment Allowance under Section 32A:
The judgment pertains to civil appeals filed by the assessee for Assessment Years 1978-1979, 1979-1980, and 1985-1986. The assessee, engaged in manufacturing tractors, claimed investment allowance under Section 32A of the Income Tax Act, 1961, for equipment in its canteen. The court analyzed Section 32A(2)(b)(iii) which specifies the eligibility criteria for investment allowance. It states that the allowance is applicable to industrial undertakings involved in the construction, manufacture, or production of articles not specified in the Eleventh Schedule. The court concluded that the canteen, although part of the production unit, does not qualify as an industrial undertaking as it does not manufacture or produce any article or thing as required by the clause. Consequently, the court dismissed the civil appeals as the canteen did not meet the conditions stipulated under clause (iii) of Section 32A(2)(b).

Issue 2: Working Out Disallowance under Rule 6D:
In another civil appeal for Assessment Year 1981-1982, two questions were raised. The first question concerned the investment allowance for equipment in the canteen, which was addressed in a separate judgment in favor of the Revenue. The second question related to the calculation of disallowance under Rule 6D of the Income Tax Rules, 1962. The rule pertains to the disallowance of certain expenses. The appellant's counsel indicated that the amount involved was insignificant and chose not to pursue this issue. Consequently, the court declined to address the second question and dismissed the civil appeal. The decision was based on the appellant's decision not to press the issue further due to the trivial amount in question.

In conclusion, the Supreme Court's judgment addressed the issues of claiming investment allowance under Section 32A and calculating disallowance under Rule 6D of the Income Tax Rules. The court emphasized the specific criteria outlined in the relevant provisions and ruled based on the fulfillment of those conditions by the assessee. The dismissal of the civil appeals was the outcome of the court's analysis and interpretation of the statutory provisions in the context of the facts presented before it.