1984 (7) TMI 221 - AT - Income Tax

Summary

Issues:
1. Entitlement to investment allowance under s. 32A of the IT Act for plant and machinery used for manufacturing cigarette filters.
2. Levy of interest under s. 216 on the assessee.

Issue 1: Entitlement to Investment Allowance
The Department contended that the assessee is not entitled to investment allowance under s. 32A of the IT Act for plant and machinery used in manufacturing cigarette filters. The Commissioner (A) had reversed the ITO disallowance of the investment allowance based on a Tribunal decision in the assessee's own case for the assessment year 1978-79. The Department challenged this decision, but the Tribunal upheld the Commissioner (A)'s finding, dismissing the revenue's appeals. The Tribunal found no grounds to overturn the earlier decision, thereby affirming the entitlement to investment allowance for the plant and machinery used in manufacturing cigarette filters.

Issue 2: Levy of Interest under s. 216
In the first cross objection, the assessee contested the levy of interest under s. 216 by the ITO. The Commissioner (A) upheld the levy of interest based on the assessee's advance tax estimates. However, the Tribunal found in favor of the assessee, stating that the assessee had voluntarily filed an enhanced estimate within the financial year, indicating good faith in advance tax payment. The Tribunal noted that no evidence of underestimation by the assessee was presented by the Department, leading to the cancellation of the interest levy under s. 216. In the second cross objection, the assessee again challenged the levy of interest under s. 216. The Tribunal accepted the assessee's contention, highlighting that the ITO did not provide any reasons to establish underestimation of advance tax. The Tribunal considered the circumstances, such as the labor trouble faced by the main customer affecting the assessee's supplies, and concluded that the interest charged by the ITO was not justified. Therefore, the Tribunal allowed the assessee's cross objection, rejecting the levy of interest under s. 216 in this case as well.

In conclusion, the Tribunal upheld the entitlement to investment allowance for plant and machinery used in manufacturing cigarette filters and canceled the levy of interest under s. 216 in both cross objections filed by the assessee.