2015 (1) TMI 1157 - HC - Income Tax

Investment allowance - entitlement to claim on all the items viz. Molasses storage tank, molasses pump, weigh bridge and diesel generating sets without appreciating the facts that items are not 'Plant and Machinery' on which investment allowance is allowable - Held that - In the light of the well settled legal position in the case of Tribeni Tissues Ltd. Vs. CIT (1991 (1) TMI 98 - CALCUTTA High Court) and CIT Vs. Mahant Oil Industries Pvt. Ltd. (1991 (3) TMI 72 - KARNATAKA High Court) we are of the opinion that the Tribunal has rightly observed that the assessee was entitled for investment allowance storage tank, molasses pump, weigh bridge and diesel generating sets, which were exclusively used in the factory. - Decided in favour of assessee. Disallowed of market fee - Held that - As decided in Commissioner of Income Tax Vs. Moti Lal Padampat Udyog Ltd. (2013 (3) TMI 394 - ALLAHABAD HIGH COURT) observed that payment of market fee to purchase the sugar cane and sugar is allowable deduction. Also in the case of CIT Vs. Macdowell & Company Ltd, (2009 (5) TMI 28 - SUPREME COURT ) had held that bottling fee realized under the Rules framed under the Excise Act is neither tax nor duty as such Section 43B of the Act is not applicable on it.- Decided in favour of assessee.

Summary

Issues:
1. Claim of investment allowance on specific items
2. Allowance of market fee as deduction

Claim of Investment Allowance on Specific Items:
The Department filed an appeal against the Income Tax Appellate Tribunal's order for the Assessment Year 1986-87. The substantial questions of law raised were related to the eligibility of the assessee company for investment allowance on items like Molasses storage tank, molasses pump, weigh bridge, and diesel generating sets. The Tribunal upheld the claim of the assessee, stating that these items were essential for manufacturing activities and fell under the category of 'Plant and Machinery'. Citing precedents like Tribeni Tissues Ltd. Vs. CIT and Commissioner of Income Tax Vs. Mahant Oil Industries Pvt. Ltd., the court affirmed that the assessee was entitled to the investment allowance on the mentioned items. Consequently, the court declined to interfere with the Tribunal's decision, upholding the allowance of investment on these items.

Allowance of Market Fee as Deduction:
The second issue raised by the Department was regarding the market fee amounting to Rs. 11,55,809. The court referred to the case of Commissioner of Income Tax Vs. Moti Lal Padampat Udyog Ltd. where it was observed that payment of market fee for purchasing sugar cane and sugar is an allowable deduction. Additionally, the court cited the Supreme Court's decision in CIT Vs. Macdowell & Company Ltd, stating that certain fees are not covered under Section 43B of the Income Tax Act. Considering these precedents, the court found in favor of the assessee, ruling that the market fee was deductible. Consequently, the court upheld the Tribunal's decision on this issue as well.

In conclusion, both substantial questions of law were decided in favor of the assessee, leading to the dismissal of the Department's appeal. The court sustained the Tribunal's order, providing detailed reasoning based on legal precedents and interpretations of relevant provisions of the Income Tax Act.