1985 (8) TMI 104 - AT - Income Tax

Summary

Issues:
1. Disallowance of investment allowance under section 32A of the Income-tax Act, 1961 for phototypesetter and air-conditioner installed in the office premises.
2. Disallowance of deduction under section 80VV of the Act.

Analysis:

Issue 1: Disallowance of Investment Allowance
The Income Tax Officer (ITO) disallowed the investment allowance under section 32A for the phototypesetter and air-conditioner installed in the office premises, citing clause (a) of the proviso to section 32A(1). However, the Commissioner (Appeals) allowed the claim, considering them as assets of the industrial undertaking for business production purposes. The department appealed, arguing that the machinery installed in office premises was not eligible for investment allowance. The representative for the assessee contended that the machinery was essential for production and part of the industrial undertaking, as there was no alternative installation location. The Tribunal analyzed the meaning of 'office premises' in the context of the statute and common parlance. It concluded that once the machinery was installed for industrial purposes in a portion of the office premises, that portion ceased to be office premises, making the machinery eligible for investment allowance. The Tribunal upheld the Commissioner (Appeals) decision, confirming that the machinery qualified for investment allowance.

Issue 2: Disallowance of Deduction under Section 80VV
The ITO disallowed the deduction claimed by the assessee under section 80VV, amounting to Rs. 3,501. The Commissioner (Appeals) allowed the claim since it was below the Rs. 5,000 threshold. However, the Tribunal noted that the total income of the assessee was nil, rendering them ineligible for the deduction under sections 80A(2) and 80B(5) of the Act. Consequently, the Tribunal reversed the Commissioner (Appeals) decision on this point, maintaining the ITO's disallowance of Rs. 3,501. The appeal was partly allowed, with the disallowance of the deduction under section 80VV upheld.

In conclusion, the Tribunal upheld the allowance of investment allowance for the machinery installed in the office premises for industrial purposes, while reversing the decision on the deduction under section 80VV due to the assessee's nil total income, resulting in the disallowance of the claimed amount.