1988 (12) TMI 153 - AT - Income Tax

Assessment Year, Cold Storage Plant, High Court, Higher Rate, Investment Allowance, Previous Year, Writ Petition

Summary

Issues:
1. Claim for deduction of excess amount realised in earlier years.
2. Claim for investment allowance on a computer used in manufacturing process.
3. Claim for investment allowance on a cold storage plant used for storing marine products.
4. Setting off loss relating to another company under section 72A.

Analysis:

Issue 1:
The first issue pertains to the claim for a deduction of excess amount realised in earlier years. The appellant, a public limited company, had taken over assets and liabilities of another company. The excess amount realised was to be credited to the Levy Sugar Price Equalisation Fund, subject to the outcome of legal battles. The Tribunal held that since this amount was not a liability of the accounting year, it cannot be allowed as a deduction for the current year. The Commissioner's decision to reject this claim was deemed justified.

Issue 2:
The second contention involves the claim for investment allowance on a computer installed in the factory for the ferro alloy division. The Income-tax Officer denied the claim stating that the computer was more for office staff convenience than manufacturing activity. However, the Tribunal ruled in favor of the appellant, stating that since the computer was directly connected to the manufacturing process, the investment allowance cannot be denied. Precedents from the Bombay High Court were cited to support this decision.

Issue 3:
The next ground concerns the claim for investment allowance on a cold storage plant used for storing marine products before export. The Income-tax Officer disallowed the claim, stating that the equipment did not qualify as plant or machinery. The Commissioner upheld this decision, emphasizing that the cold storage plant only maintained the temperature of the products. Despite the appellant's reliance on certain decisions, the Tribunal held that the marine division did not produce or manufacture any article, thus disallowing the investment allowance for the cold storage plant.

Issue 4:
The final issue pertains to the claim for setting off loss relating to another company under section 72A. During the hearing, the appellant decided not to press for relief on this point, leading to the dismissal of this ground. Consequently, the appeal was partly allowed, with the Tribunal ruling in favor of the appellant on the issues related to the computer investment allowance but against them on the cold storage plant investment allowance.