1990 (6) TMI 86 - AT - Income Tax

Summary

Issues:
1. Validity of investment allowance and additional depreciation on purchased machinery.
2. Jurisdiction of CIT under section 263.
3. Interpretation of term "installation" for grant of investment allowance.
4. Eligibility of construction business for investment allowance.
5. Comparison of definitions under different sections.
6. Requirement of manufacture or production for investment allowance.
7. Relevance of XI Schedule in determining eligibility for investment allowance.

Analysis:

1. The judgment involves the validity of investment allowance and additional depreciation granted by the ITO on machinery purchased by the assessee for construction activities. The CIT found the assessments erroneous and prejudicial to revenue, leading to a direction to withdraw the allowances granted by the ITO.

2. The assessee challenged the CIT's order, arguing lack of jurisdiction and validity of the allowances. The CIT's order was contested on the grounds that the investment allowance and depreciation were rightfully granted by the ITO and should be upheld.

3. The interpretation of the term "installation" was crucial in determining eligibility for investment allowance. The counsel argued that the machinery need not be embedded in the earth but only placed in a position for use in manufacturing or production, making movable items eligible for the allowance.

4. The eligibility of the construction business for investment allowance was debated, with the Departmental Representative contending that construction work does not qualify as manufacturing or production under section 32A. The CIT's order was supported based on this interpretation.

5. A comparison of definitions under different sections, particularly s. 32A and s. 45(d) of the Wealth Tax Act, highlighted the broader scope of "industrial undertaking" under s. 32A, supporting the assessee's claim for investment allowance.

6. The requirement of manufacture or production for investment allowance was analyzed, emphasizing that the construction of buildings constitutes the production of an article or thing not listed in the XI Schedule, making the business eligible for the allowance.

7. The relevance of the XI Schedule in determining eligibility for investment allowance was discussed, with the judgment citing a previous case to support the view that construction activities fall outside the listed articles, thus qualifying for the allowance.

In conclusion, the Appellate Tribunal ruled in favor of the assessee, allowing the appeals and setting aside the CIT's order under section 263 for both years under consideration.