1991 (1) TMI 98 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the disallowance of investment allowance on tubewells and weighing machines for the assessment year 1978-79 under section 256(1) of the Income-tax Act, 1961.

Investment Allowance Disallowance:
The Inspecting Assistant Commissioner initially disallowed the investment allowance despite the creation of the appropriate reserve and submission of plant and machinery details. The Commissioner of Income-tax (Appeals) disagreed with this disallowance, leading to a subsequent order disallowing investment allowance on various items including tube-wells and weighing machines. The Commissioner of Income-tax (Appeals) later reversed this decision, allowing the entire investment allowance. However, the Tribunal upheld the disallowance specifically on tube-wells and weighing machines, considering them not eligible under section 32A of the Act.

Interpretation of "Plant":
The Tribunal's decision hinged on whether tube-wells and weighing machines could be classified as "plant" for investment allowance eligibility. The absence of a statutory definition of "plant" led to a detailed analysis of relevant case law, including the Supreme Court's interpretation in Scientific Engineering House P. Ltd. v. CIT. The court emphasized that "plant" encompasses any apparatus used in a business, not limited to mechanical operations, and must have durability and functional significance in the trading activity.

Precedents and Legal Interpretations:
The court referred to precedents such as CIT v. Hindusthan Motors Ltd. and S. B. Cold Storage Industries Pvt. Ltd. to support the inclusion of tube-wells and weighing machines under the definition of "plant." Additionally, the court highlighted the applicability of rule 5 of the Income-tax Rules, 1962, which specifies depreciation calculation for plant and machinery, including weighing machines. The Supreme Court's decision in CIT v. Mir Mohammad All further reinforced the broad interpretation of "machinery" across different clauses of the Income-tax Act.

Judgment and Conclusion:
Ultimately, the court disagreed with the Tribunal's view, asserting that tube-wells and weighing machines are integral to the paper production process and qualify as "plant." The court emphasized that these assets play essential roles in various production stages, even if not directly involved in manufacturing. Consequently, the court ruled in favor of the assessee, overturning the disallowance of investment allowance on tube-wells and weighing machines. The judgment concluded with a decision against costs and agreement by both judges, SHYAMAL KUMAR SEN and AJIT KUMAR SENGUPTA.