1989 (4) TMI 153 - AT - Income Tax

Summary

Issues:
1. Validity of revised return for claiming investment allowance.
2. Eligibility of machinery used for manufacturing cold drinks for investment allowance.
3. Requirement of creating a reserve for claiming investment allowance.

Analysis:

Issue 1: The first issue revolves around the validity of the revised return filed by the assessee to claim investment allowance. The CIT(A) accepted the revised return under section 139(5) despite the original return not being filed under section 139(1). The CIT(A) relied on legal precedents to support this decision, emphasizing that there is no restriction on filing multiple returns under section 139(4) before the assessment is completed. The decision in Mst. Zulekha Begum's case was cited to justify this stance.

Issue 2: The second issue concerns the eligibility of machinery used for manufacturing cold drinks for investment allowance. The assessing officer contended that the machinery did not qualify for investment allowance as it fell under item (5) of the Eleventh Schedule, which excludes machinery used for certain specified articles. However, the CIT(A) noted that the assessee used synthetic flavoring essence, not blended flavoring concentrate, and cited legal cases making a distinction between the two. The CIT(A) referred to the Bombay High Court's decision in Duke & Sons (P.) Ltd.'s case to support the assessee's claim.

Issue 3: The final issue pertains to the requirement of creating a reserve for claiming investment allowance. The CIT(A) pointed out that the assessee had a loss for the relevant year, making it impossible to create the necessary reserve as mandated by law. The CIT(A) highlighted the provisions of section 32A(4) and a CBDT circular to support the assessee's position. The CIT(A) directed the assessing officer to verify the details of the claimed investment allowance and determine the amount that could be carried forward to subsequent years.

In conclusion, the judgment addressed the validity of the revised return, the eligibility of machinery for investment allowance, and the requirement of creating a reserve for claiming the allowance. The decision favored the assessee on the validity of the revised return and the eligibility of the machinery based on the distinction between synthetic essence and blended flavoring concentrate. The judgment also emphasized the importance of complying with the reserve creation requirement for claiming investment allowance in subsequent years.