1991 (4) TMI 169 - AT - Income Tax

Summary

Issues:
1. Treatment of the assessee as a small scale industrial undertaking under section 35B of the Income-tax Act.
2. Inclusion of vehicles in the definition of 'plant' for the purposes of section 32A and section 35B.
3. Valuation of assets falling within the definition of 'tools, jigs, dies, and moulds' for section 32A(2).
4. Date of valuation of plant and machinery.
5. Disallowance of expenses related to Diwali, Dassera, and other festival occasions.

Analysis:

1. Treatment of the assessee as a small scale industrial undertaking:
The primary issue in this case revolved around the classification of the assessee as a small scale industrial undertaking under section 35B of the Income-tax Act. The assessee claimed a deduction under this provision, arguing that the aggregate value of its machinery and plant did not exceed Rs. 10,00,000. However, the assessing officer found that the value exceeded the limit, leading to the denial of the deduction. The CIT (A) upheld this decision, emphasizing that the value of tools and moulds should not be excluded when determining the aggregate value of plant and machinery. The tribunal concurred with the CIT (A) and dismissed the appeal, stating that the exclusion of tools and moulds was not warranted under the law.

2. Inclusion of vehicles in the definition of 'plant':
Another contention raised was whether vehicles could be considered as 'plant' for the purposes of section 32A and section 35B. The tribunal rejected the argument that vehicles should be excluded based on the term 'installed' in the statute. The tribunal cited the broad definition of 'install' and the operational use of vehicles by the assessee to justify their inclusion in the aggregate value of plant and machinery.

3. Valuation of assets categorized as 'tools, jigs, dies, and moulds':
The assessee disputed the treatment of certain assets as 'tools, jigs, dies, and moulds' instead of plant and machinery under section 32A(2). The tribunal analyzed the definitions of 'machine tools' and 'machinery' to determine that the items in question were correctly classified as machinery, not tools. The tribunal relied on the assessee's balance sheet, which separately listed moulds, patterns, and dies, supporting the inclusion of these assets in the value of plant and machinery.

4. Date of valuation of plant and machinery:
The tribunal considered the valuation date of plant and machinery as on 31-3-1979, aligning with the information provided by the assessee. The tribunal noted that there were no favorable circumstances for the assessee regarding the valuation date, leading to the rejection of this ground of appeal.

5. Disallowance of expenses related to festivals:
The final issue pertained to the disallowance of expenses related to Diwali, Dassera, and other festival occasions. The CIT (A) upheld the disallowance based on the judgment of the Bombay High Court, citing the case of Kolhapur Sugar Mills Ltd. The tribunal, in line with the High Court's decision, found no reason to interfere with the CIT (A)'s order, resulting in the dismissal of this ground of appeal.

In conclusion, the tribunal dismissed the appeal, upholding the decisions of the assessing officer and the CIT (A) on various issues related to the classification of the assessee as a small scale industrial undertaking, inclusion of vehicles in the definition of 'plant,' valuation of assets, and disallowance of festival-related expenses.