1994 (4) TMI 103 - AT - Income Tax

Summary

Issues:
Whether the assessee firm was entitled to investment allowance on a fork-lift crane for the assessment year 1986-87.

Analysis:
The primary issue in this appeal was whether the assessee firm was eligible for investment allowance on a tractor-mounted crane purchased during the relevant year. The Assessing Officer rejected the claim, stating that the crane was not wholly used for the manufacturing business of the assessee, as it was also utilized for earning income through loading and unloading services for external parties. Additionally, the Assessing Officer considered the crane to have the character of a transport vehicle, making it ineligible for investment allowance.

The learned CIT(A) focused on the crane not being wholly used for the manufacturing business of the assessee and did not address whether the crane qualified as a transport vehicle. The absence of a cross appeal or cross objection from the Revenue required the case to be decided based on the CIT(A)'s decision.

The assessee's counsel argued that the machinery should be owned by the assessee and wholly used for the business carried on by the assessee to qualify for investment allowance under section 32A. Referring to a Special Bench decision, it was emphasized that even in cases where machinery was partly used for external purposes, investment allowance could be admissible if the primary use was for the assessee's business.

The Departmental Representative contended that the machinery must be wholly used for the business of manufacture or production of any article or thing to be eligible for investment allowance. Citing a High Court decision, it was argued that a close nexus between the machinery and the business activity was necessary for claiming investment allowance.

After considering the submissions and facts, the Tribunal found that the crane was used wholly for the business of the assessee, even though it was partially hired out for external loading and unloading activities. The absence of the term "exclusively" in section 32A(2) supported the assessee's case, as the machinery need not be exclusively used for the business of manufacture or production of any article or thing.

The Tribunal distinguished a High Court decision where fire extinguishers and time-office equipment were not eligible for investment allowance, as they were not directly connected to the manufacturing process. In contrast, the crane in question was integral to the manufacturing process, including loading and unloading activities, making it eligible for investment allowance.

Ultimately, the Tribunal held that the assessee was entitled to investment allowance on the tractor-mounted crane, directing the Assessing Officer to allow the investment allowance as per law. Consequently, the appeal was allowed.