1989 (7) TMI 135 - AT - Income Tax

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

Issue-wise Detailed Analysis:

1. Investment Allowance Claim:

The assessee, a Public Limited Company, claimed an Investment Allowance for the assessment year 1982-83, arguing that the assets were put to use during this year, despite being purchased in the preceding year. The IAC(A) noted that the assets were installed and ready for use in the previous year (1981-82), and thus, the claim for Investment Allowance was not allowable for 1982-83. However, the prohibition on Investment Allowance for sanitary ware assets was removed starting from 1st April 1982.

The IAC(A) processed the claim by disallowing amounts for assets used in the previous year and for items costing less than Rs. 750. The IAC(A) allowed Investment Allowance for items that received permissions from government agencies during the previous year relevant to the assessment year 1982-83. The assessee argued that the main furnace (Tunnel Kiln) could not be used due to the non-availability of natural gas, and commercial production started only from 1st March 1981 with an imported oil burner.

The Tribunal observed that the facts indicated nominal trial production in the previous year and that regular commercial production commenced from 1st March 1981, relevant to the assessment year 1982-83. The Tribunal held that the claim for Investment Allowance was rightly made for 1982-83, as the assets were put to use in that year. The Tribunal also allowed the claim for Investment Allowance on drawings and designs, as they were used for the installation of the kiln put to use in 1982-83.

2. Relief under Section 80J:

The IAC(A) rejected the assessee's claim for relief under Section 80J, citing the same reasons as for the Investment Allowance, i.e., the commencement of regular production in the previous year. The CIT(A) confirmed this view. The assessee argued that commercial production started from 1st March 1981, relevant to the assessment year 1982-83, and not from the date of trial production (21st July 1980).

The Tribunal accepted the assessee's claim for relief under Section 80J, adopting the same reasoning as for the Investment Allowance. The Tribunal directed the AO to verify the figures and work out the deduction accordingly.

3. Alternative Claim under Sections 80I and 80HH(A):

The assessee raised an alternative claim under Sections 80I and 80HH(A), which was not pressed during the hearing and was thus rejected.

Conclusion:

The appeal was partly allowed, with the Tribunal granting the Investment Allowance and relief under Section 80J for the assessment year 1982-83. The alternative claim under Sections 80I and 80HH(A) was rejected as it was not pursued during the hearing.

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