1993 (4) TMI 127 - AT - Income Tax

Summary

Issues:
- Allowance of investment allowance on computer systems
- Allowance of depreciation at 100% on furniture and fittings

Analysis:
1. The appeals involved the assessment years 1984-85 and 1985-86, focusing on the investment allowance and depreciation issues. The CIT (A) directed the Assessing Officer to allow investment allowance on computer systems and 100% depreciation on furniture and fittings.

2. The Assessing Officer disallowed the investment allowance on computer machinery leased to another company, stating it was not used for the assessee's manufacturing business. Similarly, the claim for 100% depreciation on furniture was rejected, considering them as mere furniture and fixtures.

3. On appeal, the CIT (A) relied on various judgments to support the allowance of investment allowance on computer systems and 100% depreciation on furniture. The CIT (A) emphasized the functional test and nexus with manufacturing activities for granting depreciation.

4. During the hearing, the departmental representative argued against the allowances, citing specific case laws and emphasizing the functional test for determining plant or machinery eligibility for depreciation.

5. The learned counsel for the assessee defended the CIT (A)'s decision, citing relevant case laws and asserting that the allowances were justified based on the functional test criteria.

6. The Tribunal upheld the CIT (A)'s decision on investment allowance for computer systems but disagreed on the 100% depreciation for furniture and fittings. The Tribunal emphasized the need for a direct nexus with manufacturing activities to qualify for depreciation.

7. The Tribunal referenced various case laws to illustrate the criteria for determining plant or machinery eligibility for depreciation. Ultimately, the Tribunal reversed the CIT (A)'s decision on the depreciation issue and restored that of the Assessing Officer.

8. In conclusion, the appeals were partly allowed, upholding the investment allowance on computer systems but reversing the decision on 100% depreciation for furniture and fittings.