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TMI Blog1996 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... , in respect of new machinery acquired and leased out by the assessee to a sister concern ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was exploiting the newly purchased machinery only as commercial assets and the income derived under the lease did not, therefore, cease to be part of the income from business?" The assessee was a firm having a factory for bleaching and dyeing. In the previous year ended October 20, 1977, corresponding to the assessment year 1978-79, the assessee purchased certain machinery for its business. But the machinery was in fact let out to another firm under a deed dated February 24, 1977, on a monthly rent of Rs. 4,000 for a mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income earned by the assessee by leasing out the machinery temporarily is assessed under the head "Profit from business" it would not go to show that the assessee is entitled to investment allowance under section 32A of the Act. Since the assessee is doing business in bleaching and dyeing and since the machinery were not used for the purpose of that business, it was submitted, that the assessee cannot claim investment allowance under section 32A of the Act. Therefore, it was submitted that because of the fact that the assessee was exploiting the machinery purchased by leasing out the same temporarily to a sister concern, the rent realised by the assessee, assessable under the head "Business income" by itself would not permit the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the same for a temporary period then also it should be considered as use of the machinery for the business of its own. Finally, it was submitted that the assessee was only exploiting the machinery as commercial assets and the income derived under the lease did not cease to be part of the income from business carried on by the assessee. For these reasons, learned counsel submitted that there is no infirmity in the order passed by the Tribunal in granting investment allowance under section 32A of the Act. We have heard learned senior standing counsel appearing for the Department as well as learned counsel appearing for the assessee. The point for consideration is whether the assessee is entitled to investment allowance under section 32A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the investment allowance under section 32A of the Act, the assessee, who acquired the new machinery should instal it or first put it to use in the immediately succeeding previous year. The machinery should be wholly used for the purpose of the business carried on by the assessee itself. According to the facts arising in the present case, the machinery was acquired by the assessee and it was not wholly used for the purpose of the business carried on by it. The machinery was let out and income was earned. Since the assessee could not accommodate the newly purchased machinery, for the time being it was let out. Since the intention of the assessee was to exploit the machinery, after the lease period was over, it cannot be said that the leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the basis of the decision in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC). The decision rendered in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC) can be extended only for the purpose of treating the lease income obtained for a temporary period as business income when the assessee could not use the machinery in its business. It cannot be further extended to state that it would satisfy the conditions prescribed in section 32A of the Act, so as to enable the assessee to say that the newly purchased machinery was utilised wholly for the purpose of the business carried on by the assessee and, therefore, entitled to investment allowance. In order to support the submission that the assessee is also entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dyeing. The business of the assessee was not hiring and letting out machinery as in the facts arising in the abovesaid decisions cited supra. Therefore, these decisions are distinguishable on facts. In Watkins Mayor (Agrico) P. Ltd. v. CIT [1979] 117 ITR 202, the Punjab and Haryana High Court held as under : ". . . . that the mere fact that there was a clause in the memorandum of association of the assessee-company that the company could hire out the machinery did not mean that it actually carried on business of letting on hire the machinery or that every machinery purchased by the assessee-company was for the purpose of hiring out the same. The intention of the assessee-company at the time of purchase of the machinery was the basic imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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