1984 (1) TMI 78 - AT - Income Tax

Summary

Issues:
1. Entitlement to investment allowance on tractors and trailers.
2. Whether the assessee is an industrial undertaking.
3. Disallowance of motor car expenses and depreciation.
4. Disallowance of business expenditure.

Entitlement to Investment Allowance on Tractors and Trailers:
The appeal concerns the entitlement of the assessee, a contractor, to investment allowance on tractors and trailers used in construction work. The CIT(A) and ITO denied the claim, asserting that construction of a dam and road does not qualify as an industrial undertaking. The assessee argued that they are eligible for investment allowance under s. 32A(2)(b)(iii) of the IT Act. The Tribunal analyzed the definition of 'industrial undertaking' and referred to relevant case laws to establish that the business of the assessee falls within the definition. The Tribunal concluded that tractors and trailers are eligible for investment allowance based on precedents and the wording of the law.

Assessee's Status as an Industrial Undertaking:
The Tribunal examined whether the assessee qualifies as an industrial undertaking under s. 32A(2)(b)(iii) of the IT Act. It referenced case laws such as CIT vs. N.C. Budharaja and Co. and National Project Construction Corporation Ltd. to determine the scope of 'industrial undertaking.' The Tribunal concluded that the construction work undertaken by the assessee falls within the definition of an industrial undertaking, thereby supporting the assessee's claim for investment allowance.

Disallowance of Motor Car Expenses and Depreciation:
The dispute revolves around the disallowance of Rs. 2000 from motor car expenses and Rs. 870 from car depreciation by the CIT(A). The assessee contended that the car was solely used for business purposes, while the departmental representative argued for potential personal use. The Tribunal decided on a 1/5th disallowance to strike a balance between business and personal use, disagreeing with the CIT(A's full disallowance.

Disallowance of Business Expenditure:
The final issue concerns the disallowance of Rs. 1000 from business expenditure confirmed by the CIT(A). The assessee argued that the expenditure aligns with the provisions of s. 37(2A) of the Act, considering the total income. The Tribunal, after evaluating the submissions and income, allowed the claim of the assessee, overturning the CIT(A)'s decision.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the assessee on the entitlement to investment allowance on tractors and trailers, the status as an industrial undertaking, and the disallowance of business expenditure. The Tribunal adjusted the disallowance of motor car expenses and depreciation to 1/5th to address potential personal use.