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TMI Blog1997 (2) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... ake of convenience. ISSUES RAISED BY ASSESSEE IN ITS APPEAL 2. The assessee-company has raised twenty-four grounds touching various issues but, during the hearing, it had conceded the following grounds as not being insisted upon. They are: ground no. 2-claim that application software should be treated as revenue expenditure; ground no. 3-expenditure on developing econometric programme; ground no. 4-repairs on leased premises; ground no. 11-restoration of claim of deduction under section 80J of the Act to the file of Assessing Officer; ground nos. 14 15-additional depreciation on various computers, equipment, etc. and on computers at the various service centres; ground no. 16-non-allowing of consumption of materials and components on notional basis; ground no. 17-non-allowing of deduction of redundant and obsolete spares, scrapped; ground no. 19-non-allowing of sales tax penalty; ground no. 21-addition to closing stock valuation on the ground that it was undervalued; ground no. 24-non-allowing of surtax. These grounds of appeals are accordingly dismissed for not being insisted upon. 3. In ground no. 1, the assessee had claimed that the club subscription of ₹ 15,400 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, the Tribunal had been consistent in its view that, the travel during the year by an employee must be aggregated and then the rule should be applied. On the issue of reimbursement to employees for use by them of the car owned by them, it was strongly insisted that it could not be maintenance of motor car. The departmental representatives supported the orders of the authorities below. 4.2 On the above issues, we express our views as under. On the issue of driver s salary and rates and taxes, because of the jurisdictional High Court in Chase Bright Steels Ltd s case (supra), we uphold the claim of the appellant company that they could not be disallowed with reference to sections 37(3A) of the Act for they are otherwise allowed with reference to sections 30 and 31 of the Act. On the issue of taxi hire charges being treated as maintenance of motor cars because, the Tribunal in the case of the assessee had held it as disallowable under section 37(3A), for the sake of consistency, we uphold the orders of the authorities below. On the issue of reimbursement to employees for using their cats for office duties, though there might appear to be some similarity with the hiring of taxis, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion before the authorities. On this issue after considering the facts on record, it is clear that the fees paid to Crawford Bailey Co. being for consultation only, we delete the disallowance. However, the fees paid to A.F. Fergusan includes for consultation and on appearance and therefore, the estimation of that part concerning appearance was justified and we uphold the disallowance. 6. The issue raised in ground no. 8 is on the repairs and maintenance of Maker Tower Flat that got damaged on a fire accident. The flat was not insured against fire, etc. and the accident had occurred and the assessee had to incur expenses to restore the flat for its use of office. On this issue, after carefully considering the rival submissions and the facts on record, we are of the opinion that the restoration of the damaged flat due to fire, did not bring about any new asset and hence, expenses incurred on bringing back to life the damaged flat is undoubtedly revenue expenditure and the claim of the appellant company is accordingly upheld. 7. The assessee-company has challenged the manner of working out the disallowance of salary and perquisite with reference to section 40A(5) of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y: - (1) In the said clause (1), the word perquisites occurring in sub-clause (iv) and the whole of sub-clause (vii) shall be omitted; Section 17(3) profits in lieu of salary includes - (i) (ii) any payment [other than any payment referred to in clause (10), clause (l0A), clause (10B), clause (11)…….. or clause (13A) of section 10], due to or received by an assessee from an employer….; Section 10 In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - Section (13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent not exceeding four hundred rupees per month as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant consideration. Explanation For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where (a)the residential accommodation occupied by the assessee is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses and driver s salary, we approve the inclusion. 9. The issue of expenses on conferences, the disallowance made under section 37(3A) of the Act, as raised in ground no. 12 are the same as in ground no. 5, namely, the claim on hall hire, related facilities for holding the conferences and on food expenses part for staff participation. Our views on ground no. 5 above would equally apply to this ground as well. 10. The assessee has raised the issue of claim of terminal allowance on data processing equipment and computers which was allowed to the extent of ₹ 25,25,997 against the claim on ₹ 41,92,691. The plea raised was that the assessee had been following consistently the scrapping of equipment and computers without taking into account any scrap value and as and when the items are sold, full value was credited to the profits and loss account. Assessing Officer accepted the plea of the assessee that due consideration to the market conditions should be given but, was not convinced that the value could be taken at nil and therefore, estimated the scrap of the equipment manufactured in 1976-77 at 20% because, asssessee had manufactured similar items in the year. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it was added to the income computed. The plea advanced by the appellant was that the addition be restricted to the extent of difference between ₹ 10,71,577 and ₹ 7,31,577 and that to the extent of refund through credit notes, should be excluded. There appears some justification on the plea of the appellant because, if an amount had collected in excess from the customers and on realization, the customers were so intimated by the credit note s, followed by actual payment. We accordingly direct the Assessing Officer to verify whether, the amount of ₹ 7,31,577 had been actually refunded to the customers by obtaining confirmations from the concerned customers and if so confirmed by the customers, the claim of exclusion from the income may be accepted. However, because, the balance of ₹ 3,40,000 is not paid to the authorities, the addition is justified and the same is upheld. 12. The appellant in ground no. 23 has touched upon the claim of certain credit balances being treated as deemed income under section 41 (1) of the Act. The department had treated the claim preferred on customers for out of pocket expenses of ₹ 5,58,480, cost of damages for dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng reliance on the decision of the Madras Bench of the Tribunal in First Leasing Co. of India Ltd v. ITO (1982) 3 ITD 808by observing that the department had not accepted the said decision. He, therefore, denied the claim of investment allowance on Data Processing Equipment and Computers that were leased out. 13.3 On the claim of investment allowance on plant and machinery used in the manufacture of computers, he observed that the claim stood rejected in the earlier years except in the assessment year 1983-84 in which the claim was accepted. He examined the claim with reference to Schedule 11 of the Act as to Computers are excluded or included from Data Processing Equipment. He noted the submissions of the assessee that computers are excluded from the list of Schedule 11 by Finance Act No. (2) of 1977 that read computers, including Central Processing Units and peripheral devices and to the debate that took in the Lok Sabha as stated by the then Finance Minister. He observed that the issue was deliberated upon in the earlier years but, that the Finance Act, 1987 has expressly excluded computers from the 11th Schedule and if the contention of the assessee was to be accepted then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has been approved by the Madras High Court that considered the issue on the basis of reference carried to the High Court under section 256(1) of the Act by the revenue in CIT v. First Leasing Co. of India Ltd (1995) 216 ITR 455 /87 Taxman 536, the Karnataka High Court decision that had upheld a similar claim in CIT v. Shaan Finance (P.) Ltd. (1993) 199 ITR 409 / 67 Taxman 213and on few other decisions of the Tribunal. The Supreme Court decisions in Mahabir Cold Storage v. CIT (1991) 188 ITR 91 and CIT v. NarangDiaryProducts (1996) 219 ITR 478, was submitted was not applicable to the case because, both the decisions were considering the assessee having been allowed development rebate on machinery used by it in its manufacturing process which machinery were leased out and accordingly had held that the machinery was no longer used for the business for which it was allowed the development rebate and approved the withdrawal of the development rebate. It was also contended that the assessee in the two cases were not in the business of leasing. 14.1 The revenue however placed reliance on the decision of the Division Bench of the Tribunal in Dy. CIT v. Sonia International (P.) Ltd [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the business of operation of ships or aircraft; (b)any new machinery or plant installed after the 31st day of March, 1976: (i)for the purposes of business of generation or distribution of electricity or any other form of power; or (ii)in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii)in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule (2A) An industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dyes and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking. does not exceed, - (i)in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees; (ii)in a case where the previous year ends after the 31 st day of July, 1980 but before the 18th day of March, 1985, twenty lakh rupees; and (iii)in a case where the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, or (b) if at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilize the amount credited to the reserve account under sub-section (4) for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the second proviso to sub-section (1)] for the purposes of the business of the undertaking; or [Emphasis supplied] 14.3 The reading of section 32A (1) of the Act indicates that investment allowance is intended to be allowed in computing the income from profits and gains from business or profession as a proportion of the actual cost of a ship or aircraft or machinery or plant that is owned by the assessee and is wholly used for the purposes of his business carried on by him. The said section states that the ship or aircraft or machinery or plant are the ones as are specified in sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or thing. It was accordingly observed that the law makers had clearly given two different descriptions to ship or aircraft and machinery or plant and it was concluded that because, the intention of the law makers had to be carried to its logical conclusion and on that basis, it was concluded that the expressions wholly used and exclusively used are two different expressions and so long as the provisions do not contain the words exclusively used , it would be wrong to hold that the expression wholly used should be read as wholly and exclusively used . On this basis it was concluded that the leased machinery or plant so long as it is used by the lessees fulfilling the condition laid down in sub-section (2) of section 32A of the Act by using it for the purposes of manufacture or production of any article or thing, the assessee the leasing company was 4to be held as fulfilling all of the basic conditions enumerated above. 14.6 On the aspect of installation, it was observed that the condition stood satisfied by the lessees having installed it. It was observed that because of the different treatment being intended by the law makers to ship or aircraft and machinery or plant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f insurance was the lessor only. It was accordingly observed that though, the machinery or plant was handed over to the lessee for use, it did not involve any transfer of any sort as is suggested by sub-section (5) of section 32A of the Act. 14.8 In the Special Bench in First Leasing Co: of India Ltd. s case (supra) was again confronted with the identical issue of investment allowance on machinery or plant leased out by the leasing company. The observations were on identical lines as of the Division Bench. The reference sought by the revenue was accepted and the statement of the case was forwarded to the Madras High Court and this decision is First Leasing Co. of India Ltd. s case (supra). The questions that were considered and the conclusions in that connection are reproduced below for the sake of facility: With reference to the said common question the sole question of law referred to us in Tax Case No. 786 of 1986 runs as follows: Whether the Appellate Tribunal was right in holding that the assessee was not entitled to investment allowance under section 32A of the Act? Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 32A shows that in order to claim investment allowance for machinery or plant, the assessee need not by himself have the industrial undertaking engaged in the business of manufacture or production of articles not specified in the Eleventh Schedule. Further, even in section 32A (4), which provides for keeping a reserve as a condition for securing the deduction, we do not find any phraseology to accept the contention of the Revenue. The object of all interpretation is to discover the intention of Parliament but the intention of Parliament must be deducted from the language used. Where the language is plain and admits of only one meaning, the task of interpretation can hardly be said to arise. If the interpretation sought to be placed by the Revenue were to be accepted, then neither the assessee which hired out the plant or machinery nor the hirer would be entitled to investment allowance. (The hirer will not be entitled to investment allowance because it does not own the plant or machinery). Such an interpretation must be avoided because it will defeat the very purpose of enactment of section 32A. The object of the enactment can also be seen from the Budget Speech of the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court like CIT v. Gwalior Rayon Silk Mfg. Co. Ltd (1992) 196ITR 149/ 62 Taxman 471, Bajaj Tempo Ltd v. CIT (1992) 196 ITR 188/ 62 Taxman 480. In particular, we may point out that in Bajaj Tempo Ltd s case (supra), it has been held that a provision in the statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. As already indicated, the present investment allowance has replaced the former development rebate allowance provided under section 33 of the Act. That section 33 gave the said development rebate allowance in respect of machinery or plant owned by the assessee and wholly used for the purposes of the business carried on by him. In that context, several decisions have held that the said allowance under section 33 of the Act could be given even to an assessee, who only hires out the abovesaid plant and machinery in the course of business of leasing. We may point out one of them, viz., Ajodhya Prasad Tara Chand Khekra v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 33 provide that machinery or plant should be installed by the assessee in the premises used by it, or it is an asset or the said machinery orplant is an asset relating to the business carried on by the assessee, as the case may be, section 32A (2B) does not have any such stipulation. That is why, the said Karnataka decision in Shaan Finance (P.) Ltd. s case (supra), concludes by saying thus: The benefit is given with reference to the actual user of the machinery, though the benefit may go to a person who does not exploit the 1 nachinel) himself for manufacturing or producing any article. Such a situation is not entirely unknown in the field of taxation. If the object behind section 32A is understood as to encourage industrial activities and investment in capital goods to facilitate industrial developments, the provision would certainly bear the meaning we have attributed to it. (p. 416) Learned counsel for the Revenue also relies on section 32A, sub-section (5)(a), and contends that since the plant or machinery in the present cases has been leased out by the assessee, it is hit by the abovesaid provision in view of the fact that the terms otherwise transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees, viz., Sundaram Finance Limited, was produced before us wherein we also find the following passage as one of the tenns of the lease deed : The lessee acknowledges . . . . . . . . . that it holds the equipment as a mere bailee of the lessor and that it shall not have any property right, title or interest in the equipment or any part thereof and shall at all times, protect and defend as bailee/licensee of the equipment. . . . 14.9 We shall now bring out from the decision of the Delhi High Court in Northern India Iron Steel Co. Ltd s case (supra), the facts and the conclusion thereof because it has been relied upon heavily by the revenue as the answer to the issue raised by the appellant company. At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following questions to this Court under section 256(1) of the Income-tax Act, 1961, in a proceeding for the assessment year 1971-72: (1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the lease money of ₹ 8,80,000 received by the assessee during the assessment year 1971-72 was assessable under section 28 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original terms of the lease. (ii)That the lease money, payable from 1st day of June 1970 to 30th day of September, 1970, would be ₹ 40,000 and thereafter it would be increased to ₹ 1,20,000 per month with effect from October 1, 1970, on the second furnace and rolling mills being set up. (iii)That the stock-in-trade, raw material and semi-finished goods would be delivered by the lessor to the lessee on such price as may be agreed upon between the parties. (iv)That the lessor had entered into certain contracts with the Railways in respect of which the lessees would undertake to manufacture and supply the same to the Railways at rates agreed upon by the lessees and the Railways and on such supplies by the lessor to the Railways, the lessor would be entitled to a commission at the rate of ten percent only on the amount of the bills. (v)The lessor company had placed certain orders for the purchase of the raw material. It was agreed between the lessor and the lessee that all such supplies from today, ie., June 1, 1970, will be accepted by the lessees on the same terms and conditions as if these orders placed by the lessees. The aforesaid lease wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other sources for the same reason, he granted the assessee relief of development rebate also. The Appellate Tribunal also upheld the assessee s claim on both counts. It held that the commercial assets of the company were temporarily let out to the lessee and, therefore, the income derived by the assessee from this lease was its business income. The development rebate was also held as allowable. The Appellate Tribunal has given a finding (which is prima facie a finding of fact) that the assessee cannot be held as having ceased its business of manufacturing iron and steel goods, heavy castings, etc., and of selling the same, it had temporarily suspended its activity of manufacturing the goods directly, in view of its financial situation, the supply made by the assessee to Beas Project itself shows that it continued in its business; temporarily it had changed its mode of doing the business. The commercial assets of the assessee continued to belong to it, which were leased to earn income. While we are in agreement with this conclusion, it is also necessary to point out that the stock-in-trade, etc., sold to the lessee, as on the date of the lease deed was an inevitable con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question. There must exist unity of ownership and user in the business. The emphasis for entitlement to rebate accrues from the use of the machinery or the plant by the owner for the purpose of its business resulting in the manufacture of the goods or services. It is not the ownership of the goods or the resultant end-product of the raw materials used that is relevant. The only relevant consideration is that, during the previous year or part of the relevant period, ownership of the asset shall remain with the assessee. Only the successor in interest of the business, in accordance with the provisions of the Act, so long as the twin requirements under section 33(1) are fulfilled, is entitled to the benefit. But, when the unity of ownership and use of the asset in the business are disrupted or a branch of an earlier business is taken over by a new firm which exists simultaneously with the other branches of the old business, the benefit of development rebate under section 33(1) does not extend to either firm. Take, for instance, a case where an assessee leases the asset to another person during the previous accounting year, the use of the plant and machinery is not for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t installed by the assessee under section 33(1) of the Income-tax Act, 1961, was legal and proper? Whether, on the facts and circumstances of the case, the order of the Tribunal holding that the conditions under section 33(1) of the Income-tax Act are satisfied, is legal and proper? The following facts were extracted by the High Court in its order: The appellant-assessee is a registered partnership firm under a deed executed and registered on November 10, 1958, between Prayagchand Periwal and Hanumanmal Periwal and Messrs Periwal and Co. P. Ltd. having its business at Purnea in Bihar State. It derives income from the business of cold storage. Messrs. Prayagchand Hanumanmal a partner- ship firm, consists of Prayagchand and Hanumanmal Periwal with 50 per cent share each and started its business with its head Office at Calcutta and a branch office at Purnea. It started functioning with effect from May 3,1956. The branch office at Purnea carried on the business in the name and style of Shri Mahabir Cold Storage. The partners had taken a loan from Periwal and Co. P. Ltd. for erection of a cold storage plant and for its running capital later, the company was taken as a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the new partnership firms are separately registered under the Act and the old one was doing its business at Calcutta and the new one at Purnea. They have been separately assessed as independent assessable entities. Only the new firm was reconstituted consisting of the two partners of the old firm, Messrs Prayagchand Hanumanmal and Periwal and Co. (P.) Ltd. Prayagchand and Hanumanmal individually are entitled to 25 per cent share each of the profits in the appellant firm and Periwal and Co. (P.) Ltd. has 50 per cent share of profit. Under the Indian Partnership Act, 1932, the partner- ship firm registered there under is neither a person nor a legal entity. It is merely a collective name for the individual members of the partner-ship. A firm as such cannot be a partner in another firm though its partners may be partners in the other firm in their individual capacity. Either under the repealed Act or the Act a firm is liable to be separately assessed to tax as well as all its partners in their capacity as individuals if they have taxable income, the appellant is separately registered under section 26A of the 1822 Act and assessed to tax from the assessment year 1960-61 and onwards. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd use was intended by the law makers. 14.13 At this point, we may observe that the law makers were quite aware of an assessee may have some machinery that is taken on hire and this is clear from the reading of Explanation 2(iii)(a) (b) to section 32A (2) of the Act which provides the manner of determining a concern as a small scale industrial undertaking on the basis of its investment on machinery and plant by stating that in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant. This explanation in our opinion gives an indication that the law makers were aware of the various entrepreneurs may add to their production capacity machinery or plant by taking them on lease or hire and because, the law makers had provided a separate category of entrepreneurs called small scale industrial undertaking wanted to ensure that these entrepreneurs are not placed in that category merely on the strength of their owned machinery and plant, if they happen to use machinery or plant that are taken on lease. This will also make it clear that the person who takes on lease or hire any machinery or plant would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the subject matter of the hiring agreement dated 27th August, 1969. The facts of this case are in a narrow compass. The respondent-assessee is a registered firm. It carried on the business of manufacture of milk powder . We are concerned herein with the assessment year 1965-66. For the said year, the ITO by order dated 29th June, 1968, allowed development rebate for the entire machinery and plant owned by the assessee and used for the said business in the sum of ₹ 1,00,093. A part of the machinery was subsequently sold. The machinery that was left en-titling the assessee to the development rebate for the said year was determined at of ₹ 85,222. This machinery was let out by the assessee on 27th August, 1969 to M/s Hindustan Lever Ltd. for a period of three years with a provision for further renewal of the agreement or-for outright purchase. In the circumstances, the ITO, by an amendment order dated 30th March, 1970, withdrew the development rebate of ₹ 1,00,093. The appeal filed by the assessee was dismissed by the AAC. In further appeal before the Tribunal, it was contended that there was no sale or transfer within the meaning of section 34(3)(b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not used by the assessee for the purpose of business carried on by him. It is not only the ownership of the plant or machinery, but also is its exclusive user by the assessee for the purpose of his business, that is essential to enable the assessee to get the development rebate under section 33(1)(a). In cases where an assessee disables himself from such continued exclusive user of the plant or machinery for the purpose of his business for the specified period, the consequences specified in section 34(3)(b) will follow, provided the machinery or plant is otherwise transferred . It is true that there is no sale; nor is there any complete extinguishment of the right of the assessee in the machinery or plant by the grant of lease; but the exclusive possession and enjoyment of the machinery or plant by the assessee no longer exists or survives. Such right to exclusive possession and enjoyment vests in the lessee and it is a case where the machinery or plant is otherwise transferred to the lessee. It is a case where the machinery or plant is otherwise transferred by the assessee to any person before the expiry of eight years from the end of the previous year in which it was acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant provisions in section 33 provide that machinery or plant should be installed by the assessee in the premises used by it, or it is an asset or the said machinery or plant is an asset relating to the business carried on by the assessee, as the case may be, section 32A (2B) does not have any such stipulation. That is why the said Karnataka decision in Shaan Finance (P.) Ltd s case (supra) concludes by saying thus (at page 416): The benefit is given with reference to the actual user of the machinery, though the benefit may go to a person who does not exploit the machinery himself for manufacturing or producing any article. Such a situation is not entirely unknown in the field of taxation. If the object behind section 32A is understood as to encourage industrial activities and investment in capital goods to facilitate industrial developments, the provision would certainly bear the meaning we have attributed to it. Learned counsel for the Revenue also relies on section 32A, sub-section (5)(a), and contends that since the plant or machinery in the present cases has been leased out by the assessee, it is hit by the abovesaid provision in view of the fact that the terms other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of hiring. For example, taxis on hire are entitled to higher depreciation. This also goes to show that it is sufficient compliance that the asset is owned by the assessee and is used by it in its business of hiring or leasing. If we proceed on the basis that the hiring leads to otherwise transferred then, on every occasion a person hires a taxi, it must be deemed to have been transferred to the hirer and the owner thereof would be deprived of having absolute right over it, and that it is also not used by him. The provision of higher depreciation rate for taxis on hire clearly goes to show that the law makers had clearly appreciated that the assessee may be the owner but, by merely letting it out or leasing it, does not lose any right over it provided that, he does the act of letting or leasing as his business activity. The concept of leasing has been it appears was developed on this reasoning also apart from the observation as was made at the time of introduction of section 32A of the Act, The present scheme of investment allowance will facilitate investment in priority industries and reduce the dependence of the corporate sector on public financial institutions. 14.18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hire or lease were used by the lessees for the purpose of manufacture or production of any article or thing not specified in Schedule 11 to the Act. 14.21 The above observation is made without any prejudice to the issue of Data Processing Equipment and Computers are not eligible for investment allowance because, they are covered by Schedule 11 to the Act, which we shall now deal with in the ensuing lines. Item 22 of Schedule 11 reads Office machines and apparatus such as typewriters, calculating machines, cash registering machines, cheque writing ma-chines, intercom machines and teleprinters Explanation The expression office machines and apparatus includes all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and for data processing and for transmission and reception of messages . The amen- dment that was made with effect from 1987 was with reference to the words for data processing and for transmission and reception of messages and in its place for data processing (not being computers within the meaning of section 32AB) . The Assessing Officer and CIT (A) were of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um under the collective personal account policy that was disallowed by the Assessing Officer but allowed by the CIT (A). Considering the fact that the issue stands allowed by the Tribunal for the assessment year 1980-81, and the reference was also rejected, for the sake of consistency, we would uphold the order of CIT (A). 16. The issue as raised in ground No.3 is objection to the deduction allowed on the expenditure incurred on the maintenance of a garden within the factory premises. Because, the garden was within the factory, maintaining it as property of the assessee, in our opinion that the CIT (A) was justified in deleting the disallowance and we accordingly uphold his order on this point. 17. The issue as raised in ground No.4 is with reference to the amount disallowable because of the provisions contained in section 37(3A) of the Act. The expenses on advertisement, repairs and insurance of cars, depreciation on cars and rent of garage. Because, the jurisdictional High Court in Chase Bright Steel Ltd s case (supra) had held that expenses that are allowed with reference to sections 30, 31 and 32 of the Act cannot be disallowed with reference to section 37(3A) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) that stands confirmed in Century Spg. Mfg. Co. Ltd s case (supra). Accordingly, the claim preferred by the assessee is upheld and that the rent of guest house and depreciation on assets of the guest house that is allowed under sections 30 and 32 of the Act, could not be considered for disallowance under section 37 (4) of the Act. 20. The issue of expenses that are considered with reference to section 80VV of the Act, out of fees paid to M/s Crawford Bailey Co., Price Waterhouse Co., Mr. N. A. Palkhiwala, Mr. S.E. Dastur and A.F. F ergusan Co. of ₹ 12,750, ₹ 41,921, ₹ 3,600, ₹ 5,250 and ₹ 14,500 respectively, which after considering the facts and the order of CIT (A), we are of the view that the order of CIT (A) does not call for any interference. 21. The revenue is agitated by the direction of the CIT (A) in working out the disallowance with reference to the provisions of section 40A (5) of the Act. CIT (A) had held that contributions made to hospital and nursing home, repairs to flats owned by the company, club subscription, accident insurance premium should be excluded in evaluation of perquisites for disallowance. He also held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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