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TMI Blog1998 (6) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) holding that the assessee is entitled to investment allowance under section 32A of the Income-tax Act, 1961, even though the assessee is not engaged in the business of manufacture or production of any article or thing?" The assessee-company, Rensult Investment and Finance Pvt. Ltd., is engaged in the business of financing and leasing. In the previous year relevant to the assessment year 1985-86, it purchased certain machinery which was leased out to various parties. The assessee claimed investment allowance under section 32A of the Income-tax Act, 1961 ("the Act"), in respect of machinery leased out by it. This claim of the assessee was rejected by the Income-tax Officer on the ground that the assessee-company was not carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment allowance under section 32A of the Act can be claimed by the assessee only in a case where he himself uses the machinery for the purpose 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. We have carefully considered the above submission. Section 32A of the Act, so far as is relevant, at the material time stood as under : "32A. Investment allowance.---(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness 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... (5) Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act--- (a) if the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in connection with the amalgamation or succession, referred to in sub-section (6) or sub-section (7)." From a plain reading of the above section, it is clear that in order to get the benefit of investment allowance in respect of any machinery or plant, the assessee must prove that machinery was owned by him and that it was wholly used for the purposes of the business carried on by him. The assessee must also satisfy that the machinery or plant was installed in any industrial undertaking for the purpose of manufacture or production as specified in sub-section (2) of section 32A. In the instant case, there is no dispute about the fact that the machinery in respect of which investment allowance is claimed was owned by the assessee. So f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue before the Supreme Court was that investment allowance could be claimed by the assessee only in a case where he was the owner of the machinery and used the machinery himself. In other cases, investment allowance could not be granted. The Supreme Court, on a perusal of the provisions of section 32A of the Act, decided against the Revenue and held that where the business of the assessee consisted of hiring out machinery and where income derived by him from the hiring of such machinery was his business income, he must be considered as having used the machinery for the purposes of its business. It was observed : "When the business of the assessee is leasing of such machines, the machines so leased out are being used for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that this sub-section only describes the machinery in respect of which investment allowance can be granted. It was pointed out that under sub-section (2)(b) of section 32A of the Act there was no express requirement that the assessee must use the plant and machinery. It was held : "Sub-section (2)(b), therefore, refers to the uses to which the machinery can be put. It does not specify that the assessee himself should use the machinery for these purposes." In the case before us, in the statement of case, it is stated that the assessee is engaged in the business of financing and leasing. There is nothing to show the nature of financing and leasing---whether it was a case of hiring simpliciter or leasing simpliciter or hire purchase or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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