1985 (4) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Grant of investment allowance under section 32A of the Income-tax Act, 1961.
2. Grant of relief under section 80J of the Income-tax Act, 1961.
3. Determination of the acquisition date of Tug No. IV.
4. Classification of Tug No. IV as a new or second-hand asset.
5. Whether the Government of India can be considered a "person" resident in India under the Act.

Detailed Analysis:

1. Grant of Investment Allowance under Section 32A:
The primary issue was whether the assessee-corporation was entitled to an investment allowance under section 32A for Tug No. IV. The IAC initially disallowed the investment allowance, arguing that Tug No. IV was acquired and installed before 1-4-1976, making it ineligible for the allowance. The Commissioner (Appeals) reversed this decision, interpreting "acquired" to mean possession and use for business purposes, which occurred after 1-4-1976. The Tribunal upheld the Commissioner (Appeals)'s decision, agreeing that the word "acquired" connotes possessive ownership and actual use in business.

2. Grant of Relief under Section 80J:
The IAC also withdrew the section 80J relief, arguing that Tug No. IV was a second-hand ship and its value could not be included in capital computation. The Commissioner (Appeals) found that the Government of India does not qualify as a "person" resident in India, and thus, the previous use of the tug did not disqualify it from section 80J relief. The Tribunal upheld this view, stating that the Government of India is not a "person" under the Act, and therefore, the relief was correctly granted.

3. Determination of the Acquisition Date of Tug No. IV:
The IAC deemed Tug No. IV to have been acquired on 31-3-1976, the date of the Government of India's notification. However, the Commissioner (Appeals) and the Tribunal interpreted the acquisition date as 1-4-1976, when the tug was actually possessed and used by the assessee-corporation. This interpretation was supported by evidence that income from the tug was credited to the assessee-corporation from 1-4-1976 onwards.

4. Classification of Tug No. IV as a New or Second-Hand Asset:
The IAC classified Tug No. IV as a second-hand asset because it was used by the Shipping Corporation of India before its transfer. The Commissioner (Appeals) and the Tribunal disagreed, stating that the previous use by the Government or its agent did not render the tug second-hand for the purposes of the Act. The Tribunal emphasized that the Government does not qualify as a "person" resident in India, and thus, the tug remained a new asset for the assessee-corporation.

5. Whether the Government of India is a "Person" Resident in India:
The Tribunal extensively discussed whether the Government of India could be considered a "person" resident in India under the Income-tax Act. It concluded that the Government is not a "person" as defined by the Act, citing authoritative texts and legal interpretations. This conclusion was crucial for granting both the investment allowance and section 80J relief, as it meant the previous use of the tug by the Government did not disqualify it from these benefits.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision to grant both the investment allowance under section 32A and the relief under section 80J. It affirmed that Tug No. IV was acquired on 1-4-1976, was not a second-hand asset, and that the Government of India is not a "person" resident in India under the Act. Consequently, the departmental appeal was dismissed as lacking substance.