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TMI Blog1998 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... r, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to investment allowance in respect of new machineries leased out ?" Out of the four questions as stated above the first two questions came to be referred, at the instance of the assessee and questions Nos. (3) and (4) at the instance of the Revenue. All these questions arise out of the income-tax assessment of Mercantile Credit Corporation Ltd., the assessee herein. The assessment year is 198384 for the previous year ended on March 31, 1983. The assessee is a company which carries on business, inter alia, in leasing of machinery. Arguments of Mr. K. Vaitheeswaran of Subbarayar Aiyar, Padmanabhan and Ramamani, learned counsel appearing for the assessee, and Mr. R. Sivaraman, learned counsel representing Mr. C. V. Rajan, learned junior standing counsel representing the Revenue, were heard. We shall now enter into the arena of discussion in finding out answers to the questions as stated above in seratim. Question No. (1) : Our attention had been drawn to the case of CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. [1996] 219 ITR 644 (SC), in which an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent to the amendment rules coming into existence, which event happened on April 2, 1983, Appendix I, Part I(III)(i) had been amended in so far as it is relatable to rate changing it from ten per cent to fifteen per cent. The amendment rules do not at all provide for retrospective operation of the rules and this aspect of the matter is of signal importance in deciding the tangle posed in the instant case. The rules under the Income-tax Act, are framed by the Board, of course, subject to the control of the Central Government, pursuant to the salient provision adumbrated under section 295 of the Income-tax Act. Sub-section (1) of section 295 of the Income-tax Act provides that the Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of this Act. Sub-section (4) of section 295 prescribes that the power to make rules conferred by this section shall include the power to give retrospective effect, from a date, not earlier than the date of commencement of this Act, to the rules or any of them and, unless the contrary is permitted (whether expressly or by necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court respectfully agreed with the view taken by the Lordships of the Calcutta High Court in the case of S. P. Jaiswal Estates Pvt. Ltd. [1994]209 ITR 307. For the reasons as above, the Tribunal was rather right in holding that the amended rates of depreciation prescribed in Appendix I to the Incometax Rules, would not be applicable for pending assessment as on April 2, 1983, and this question is answered accordingly. Question No. (3) : So far as the expenditure incurred by the assessee-company in relation to the payment of subscriptions made by it to various clubs on behalf of the employees, there is no material worth the name available to make it appear that the employees were directed to become members of various clubs for the purpose of the company's business. Becoming a member of a club by the various employees of the company may be for the personal benefit of such employee or employees, in the sense of enjoying amenities and facilities provided by the club, either in the form of recreation or sports activities. That sort of membership may not be having any correlation to the legitimate needs of the company. In this view of the matter, we hold that the expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said machinery or plant should be 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. Further, the object of facilitating investment in priority industries will be fulfilled whether the assessee himself makes use of the plant or machinery in question or the hirer. What their Lordships of the Supreme Court said in the case of Shaan Finance (P.) Ltd. [1998] 231 ITR 308, in paragraphs 9 and 10 (at pages 312 and 313) is relevant for the present purpose, which got reflected as under : "Sub-section (2) of section 32A, however, requires to be examined to see whether there is any provision in that sub-section which requires that the assessee should not merely use the machinery for the purposes of his business, but should himself use the machinery for the purpose of manufacture or for whatever other purpose the machinery is designed. Sub-section (2) covers all items in respect of which investment allowance can be granted. These items are ship, aircraft or machinery or plant of certain kinds specified in that sub-section. In respect of a new ship or a new aircraft, section 32A(2)(a) expressly presc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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