2005 (9) TMI 44 - HC - Income Tax

Whether, Tribunal was, in law, justified in holding that the assessee s claim of investment allowance under section 32A on computer was allowable? - Whether, Tribunal was, in law, justified in holding that the assessee s claim for investment allowance under section 32A as well as additional depreciation on computer was allowable? - we answer the aforesaid question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
1. Interpretation of investment allowance under section 32A of the Income-tax Act, 1961 for the installation of a computer.
2. Determination of whether a computer qualifies as plant and machinery for the purpose of claiming investment allowance and additional depreciation.

Analysis:
1. The first issue in this case pertains to the interpretation of investment allowance under section 32A of the Income-tax Act, 1961 for the installation of a computer by a registered firm engaged in the business of pumps and electrical motors. The firm, a sole distributor of Jyoti Pump, claimed investment allowance for the computer during the assessment year 1982-83. Initially, the claim was rejected by the assessing authority, but upon appeal, it was established that the computer was installed for offering services to outsiders, resulting in substantial receipts for services rendered. The Commissioner of Income-tax (Appeals) concluded that the computer constituted plant and machinery under section 32 of the Income-tax Act, 1961, thus entitling the assessee to investment allowance for the computer.

2. The second issue revolves around determining whether a computer qualifies as plant and machinery for the purpose of claiming investment allowance under section 32A as well as additional depreciation. The Tribunal was tasked with deciding whether the assessee's claim for investment allowance under section 32A and additional depreciation on the computer was justifiable. In a related judgment, the Court held that items such as "ultrasound machine" and "X-ray machine" are considered plant and produce "article or things." Following this precedent, the Court ruled in favor of the assessee, affirming that the computer in question should be treated as plant and machinery, thereby allowing the investment allowance and additional depreciation claims.

In conclusion, the Court's decision in both references favored the assessee, confirming their entitlement to investment allowance under section 32A and additional depreciation on the computer. The judgment aligned with previous rulings establishing that certain equipment, including computers, can be categorized as plant and machinery for tax purposes.