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TMI Blog2010 (7) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case, the Tribunal was right in law to hold that the assessee is entitled to investment allowance under section 32A subject to other conditions being satisfied ?" 2. This question is referred in the application of the Revenue made under section 256(1) of the Act. 3. The matter relates to the claim of investment allowance on plant and machinery used by the assessee. The assessee had claimed that it was eligible for the deduction under section 32A(2)(b)(iii) of the Income-tax Act which, inter alia, provides for investment allowance in respect of machinery or plant owned by the assessee and wholly being used for the purpose of the business carried on by him in any industrial undertaking and for the purpose of business of construction and manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule. Item 1 of the Eleventh Schedule reads as under : "Beer, wine and other alcoholic spirits" 4. The assessee is dealing both in industrial spirits as well as items like Indian Made Foreign Liquor (IMFL), country liquor, etc. As per the details furnished by the assessee, the Assessing Officer confirmed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and that was a reason that the Commissioner of Income-tax (Appeals) maintained the order of the Assessing Officer. The Income-tax Appellate Tribunal, on the other hand, was of the opinion that since the main purpose for which the machinery and plant installed by the assessee was utilized for manufacturing of industrial spirit and this aspect was not disputed, the assessee would be entitled to the investment allowance. 6. We have already reproduced the above entry 1 which mentions "beer, wine and other alcoholic spirits". The first aspect that would require determination would be as to whether the manufacturing of industrial spirit would come with the ambit of the aforesaid item. 7. The learned counsel for the assessee has argued that the words "other alcoholic spirits" have to take colour from the preceding expression used in the item, namely, "beer and wine". He submitted that "beer and wine" are meant for human consumption and, therefore, applying the maxim noscitur a sociis, the expression "other alcoholic spirits" is to be interpreted. When interpretation is given effect in this manner, it is only those alcoholic spirits which are meant for the human consumption that wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, the above principle is squarely applicable. In our view, the washing soap manufactured by the asses-see will not fall under entry No. 4 as it cannot be included in the term soap used in the entry alongwith other items mentioned therein, rather it fits in more under entry No. 20 which stood deleted on April 1, 1982." 11. The second aspect which arises for consideration is what would be the position in case the machinery is used for both in manufacture of industrial spirits as well as IMFL, which is the case here. Section 32A allows investment allowance where machinery or plant is used for the purposes which are specified in sub-section (2) thereof. However, at the same time, it also stipulates that where plant and machinery is used for the purposes mentioned in Schedule 11, such investment allowance would not be admissible. In the present case, the plant and machinery is used for manufacturing of IMFL which is one of the activities specified in item 1 of the Eleventh Schedule. At this juncture, one has to take note of sub-section (2A) of section 32A as it relaxes the bar contained in the Eleventh Schedule to some extent. It reads as under : "(2A). The deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular No. 229, dated August 9, 1977 issued by the Central Board of Direct Taxes explaining the amendment in section 32A of the Act by the Finance Act, 1977. The relevant portion of the said Circular reads as under [1978] 111 ITR (St.) 9 : "The Finance (No. 2) Act, 1977, has substituted sub-clauses (ii) and (iii) of clause (b) of section 32A(2) referred to above by two new sub-clauses. Under the new provisions, investment allowance will be allowed in respect of new machinery or plant installed for the purposes of business of construction, manufacture or production of all articles or things, except certain articles or things of low priority specified in the list in the new Eleventh Schedule inserted in the Income-tax Act by section 28 of the Finance (No. 2) Act, 1977. The list of articles or things contained in the new Eleventh Schedule is given in annexure II to this circular. The disqualification arising from the installation of machinery or plant for the purposes of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule will, however, not apply in respect of machinery or plant installed in small scale industrial undertakings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee in support of its submission that it was mainly manufacturing industrial spirit. 16. In any case, we also find from the order of the Tribunal that the Tribunal had sent back the case to the Assessing Officer with the direction to give the investment allowance to the assessee "subject to other conditions being satisfied" and to determine the admissible claim under section 32A in respect of plant and machinery installed by the assessee. In such circum-stances, while remitting back the case to the Assessing Officer, the Tribunal should have left it for the Assessing Officer to determine as to whether the plant and machinery is mainly used for manufacturing of industrial spirit or not. However, it may not be necessary to give this direction, inasmuch as, we are informed that after the case was remanded back to the Assessing Officer, the Assessing Officer has gone into this exercise and has passed a fresh assessment order. We have been given a copy of that order and a perusal thereof would demonstrate that the Assessing Officer has specifically stated that the main activity of the assessee is to manufacture industrial spirit which is also known as ethyl alcohol and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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