1989 (7) TMI 133 - AT - Income Tax

Actual User, Assessing Officer, Assessment Year, Industrial Undertaking, Investment Allowance, Plant And Machinery, Previous Year, Profits And Gains

Summary

Issues Involved:
1. Investment Allowance
2. Relief under Section 80J
3. Alternative claims under Sections 80-I and 80HH(A)

Issue-wise Detailed Analysis:

1. Investment Allowance:
The primary issue was the assessee's claim for Investment Allowance on assets worth Rs. 84,69,945. The assessee, a Public Limited Company, claimed this allowance for the assessment year (A.Y.) 1982-83, stating that the assets were put to use during this year, although they were purchased in the preceding year (A.Y. 1981-82). The Income-tax Appellate Tribunal (ITAT) noted that the construction of the Kadi unit and installation of machinery were completed in A.Y. 1981-82, and depreciation was claimed and allowed for that year. However, the Investment Allowance was specifically prohibited for sanitaryware manufacturing under the 11th Schedule for A.Y. 1981-82, but this prohibition was removed from A.Y. 1982-83.

The department's stance was that the assets were "used" in A.Y. 1981-82 as they were installed and ready for use, citing cases like Whittle Anderson Ltd. v. CIT and Capital Bus Service (P.) Ltd. v. CIT. The assessee argued that the main kiln was not operational due to the lack of natural gas, and commercial production started only on 1-3-81 with an imported oil burner, making A.Y. 1982-83 the appropriate year for claiming the allowance. The ITAT accepted the assessee's argument, emphasizing that commercial production commenced on 1-3-81, supported by the Industries Commissioner's certificate and various documents. The tribunal concluded that the assets were first put to use in A.Y. 1982-83, thus allowing the Investment Allowance for that year.

2. Relief under Section 80J:
The second issue was the assessee's claim for relief under Section 80J, which was similarly rejected by the department on the grounds that regular production had commenced in A.Y. 1981-82. The ITAT applied the same reasoning as in the Investment Allowance issue, noting that commercial production began on 1-3-81, making A.Y. 1982-83 the relevant year for the claim. The tribunal directed the assessing officer to verify the figures and work out the deduction accordingly, thus deciding this issue in favor of the assessee.

3. Alternative Claims under Sections 80-I and 80HH(A):
The final issue was the alternative claim under Sections 80-I and 80HH(A) of the Income-tax Act, 1961. This ground was not pressed by the assessee during the hearing and was therefore rejected by the tribunal.

Separate Judgment:
The Judicial Member concurred with the conclusions of the Accountant Member but added that the machinery was not physically used in A.Y. 1981-82, and the department's case rested on passive use. He emphasized that the machinery was physically used in A.Y. 1982-83, entitling the assessee to the allowance for that year. He found it unnecessary to delve into the applicability of the Board's Circular pertaining to Section 80J or the distinction between commercial and trial production for the earlier year.