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Issues involved: Interpretation of provisions of Income-tax Act, 1961 regarding investment allowance on machinery used in contract business.
First Issue - Investment allowance on general machinery: The assessee, a contractor engaged in the Krishna Project, claimed investment allowance under section 32A of the Act for general machinery used in contract work. The Tribunal restored the matter to the Commissioner (Appeals) for consideration. The court declined to answer the first question regarding the allowance of Rs. 2,270 on general machinery due to the small amount involved and the relief already granted to the assessee. Second Issue - Investment allowance on dumpers and tippers: The second question revolved around whether the assessee is entitled to investment allowance for dumpers and tippers used in construction work. The Revenue argued that these vehicles are not eligible under section 32A as they do not produce an end product. However, the court interpreted the provisions, emphasizing that machinery used in the business of construction is normally eligible for investment allowance. The court referred to relevant case laws and highlighted that the purpose of business includes all activities necessary for carrying on the business, not just those directly producing an end product. The court concluded that dumpers and tippers are eligible for investment allowance as they are essential machinery for construction work, distinct from road transport vehicles excluded under the Act. Conclusion: The court ruled in favor of the assessee, stating that dumpers and tippers are eligible for investment allowance under section 32A. The interpretation of the provisions led to the conclusion that these vehicles are integral to the construction business and do not fall under the exclusion of road transport vehicles. The decision favored the assessee, and the references were answered in the affirmative against the Revenue.
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