1983 (11) TMI 142 - AT - Income Tax

Summary

Issues Involved:

1. Computation of relief under section 80J of the Income-tax Act, 1961.
2. Entitlement to investment allowance on various items of machinery, including motor cars and a diesel engine generator, and the adequacy of the investment allowance reserve created.

Issue-wise Detailed Analysis:

1. Computation of Relief Under Section 80J:

The first issue pertains to the computation of relief available to the assessee under section 80J of the Income-tax Act, 1961. The Income-tax Officer (ITO) computed the relief based on the retrospective amendment made by the Finance (No. 2) Act, 1980. The assessee challenged the validity of this retrospective amendment, but the Commissioner (Appeals) rejected the claim. The Tribunal noted that for the succeeding assessment years, a similar issue had arisen, and the Tribunal had followed the view approved by the Gujarat High Court in CIT v. Surat District Co-operative Milk Producers' Union Ltd., where the matter was restored to the first appellate authority for a fresh decision in conformity with any decision the Supreme Court may render on the point. Consequently, the Tribunal set aside the decision of the Commissioner (Appeals) and restored the matter to his file for a fresh decision in conformity with any Supreme Court decision on the issue.

2. Entitlement to Investment Allowance on Various Items of Machinery:

a. Motor Cars:

The assessee claimed investment allowance on motor cars, which was disallowed by the ITO on the ground that motor cars are road transport vehicles excluded from the benefit of investment allowance under proviso (b) to section 32A(1) of the Act. The Commissioner (Appeals) upheld this view, stating that motor cars are clearly road transport vehicles. The assessee argued that motor cars used for the company's purposes and not for hire or reward should not be classified as road transport vehicles. The Tribunal, however, agreed with the departmental representative that a motor car, as commonly understood, is a road transport vehicle regardless of whether it is used for hire or not. Therefore, the Tribunal held that motor cars are road transport vehicles and are not entitled to investment allowance.

b. Diesel Engine Generator:

The assessee also claimed investment allowance on a diesel engine generator. The ITO disallowed this claim because the investment allowance reserve created was insufficient, and the deficit was made good only in the accounts for the succeeding year. The Tribunal noted that the assessee had created an adequate reserve before the assessment was completed, as required by section 32A(4)(ii). The Tribunal referred to the decision of the Chandigarh Bench in Swastika Metal Works v. ITO, which allowed investment allowance as long as the statutory reserve was created before the assessment was completed. The Tribunal also considered the Explanation to section 32A(4), which permits the creation of a reserve in the accounts of the subsequent year under certain conditions. Since the assessee had claimed investment allowance in the return filed under section 139 and had created a reserve covering the investment allowance claimed, the Tribunal held that the assessee was entitled to the investment allowance on the generator. The ITO was directed to verify the correctness of all figures before granting the investment allowance on this asset.

Conclusion:

The appeal was allowed in part. The decision of the Commissioner (Appeals) regarding the computation of relief under section 80J was set aside and restored for a fresh decision in conformity with any Supreme Court decision. The Tribunal upheld the disallowance of investment allowance on motor cars but allowed the investment allowance on the diesel engine generator, subject to verification of figures by the ITO.