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TMI Blog1995 (9) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ross-objection by the assessee, relate to the assessment year 1977-78. The assessee herein is the same as in Tax Case No. 786 of 1986, which relates to the assessment year 1979-80 and arises out of the order dated October 31, 1983, of the Tribunal. Tax Case No. 1651 of 1986 relates to another assessee in relation to the assessment year 1980-81 and arises out of the order dated August 30, 1985, of the Tribunal. Tax Case No. 1242 of 1991 which relates to the assessment year 1983-84 and Tax Case No. 1243 of 1991 which relates to the assessment year 1984-85, both arise out of the order dated February 8, 1990, of the Tribunal. Both these later two cases relate to yet another assessee. The abovesaid " common question " is about the investment allowance under section 32A of the Act, which is one of the deductions allowed in computing the " total income " chargeable to tax under the Act. The abovesaid allowance is given with effect from April 1, 1976, the said provision having been inserted in the Act by the Finance Act, 1976, and the said allowance has taken the place of development rebate allowance which was given earlier. The said allowance, under section 32A, is given, inter alia, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question " involved is reflected only in the second of the abovesaid questions referred to us, which runs as follows : " Whether the Appellate Tribunal was correct in law in holding that the assessee is entitled to investment allowance under section 32A and initial depreciation under section 32(1)(iv) of the Act on machinery leased out? " In the above question, reference to section 32(1)(iv) is not correct it must read as section 32(1)(vi). The said provision refers to initial depreciation. As per learned counsel for the Revenue, the arguments advanced in respect of investment allowance would apply to the said initial depreciation also and the decision to be given in respect of investment allowance in regard to the actual question at issue would also equally apply to initial depreciation. Then, the first of the abovesaid two questions referred to us, runs as follows : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding and had valid materials to hold that the reopening of the assessment under section 147(b) of the Act was without jurisdiction and, therefore, invalid ? " Regarding this first question, learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year in which .... the machinery or plant was installed, a .... new machinery or plant .... for the purposes of the business of the undertaking ; and .... (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 .... machinery or plant is sold or otherwise transferred 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 ..... " Thus, the main conditions to be satisfied as per section 32A(1) and (2) are : (1) the subject-matter is to be owned by the assessee ; (2) is wholly used for the purpose of business of the assessee ; and (3) the subject-matter should come under any of the enumerated categories of section 32A(2). That the plant or machinery in the present case is owned by the assessee is not disputed. As regards the second condition, the assessee is wholly using it for the purpose of his/its business which consists of leasing it to other parties. Sub-section (1) or (2) of section 32A does not require anywhere that the plant and machinery mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hires it out to a person who may not have enough funds at his command, the necessity of the latter person to see necessary funds from public financial institutions for acquiring the plant or machinery himself may not arise and to that extent the dependence on such institutions is reduced. In this way the second object also is satisfied. We may also point out that an identical question arose in CIT v. Shaan Finance (P.) Ltd. [1993] 199 ITR 409 (Kar) and the said court has also upheld that investment allowance can be claimed by a person similarly placed as the present assessees. According to the said decision, the only requirement under section 32A(2)(b) is that the plant or machinery owned by the assessee should have been used by someone in the manner stated in the said sub-clause. It has also been held therein, in the context of the abovesaid expression " wholly used " finding place in both sections 33 and 32A that the term " wholly " means " entirely " and not " exclusively " and that the machinery in its entirety may be used by its owner and it is possible for another also to use it. In this connection, the said decision also relied on similar observation of this court in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [1967] 66 ITR 576 (All). In that case the court held that for kolhus (sugarcane crushing machine) such development rebate could be allowed. In that context, the relevant observation is as follows (at page 579) : " The kolhus on which development rebate is claimed once were admittedly let out and were, therefore, wholly used for the assessee's business which consisted of hiring out of such kolhus. The assessee was neither a crusher of sugarcane nor was that his business, and, therefore, ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 " otherwise transferred " found therein would include such lease. So, according to him, the said allowance " shall be deemed to have been wrongly made ". But, we are unable to accept this contention also. First of all, even on the footing that the term " otherwise transferred " would include such " leases " as given in the present cases, the said provision will not disentitle the assessees herein from securing investment allowance, since the said provision only speaks of " mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, learned counsel for the Revenue drew our attention to Blue Bay Fisheries (P.) Ltd. v. CIT [1987] 166 ITR 1 (Ker), but that turned on its own facts. There, a trawler was leased out and the court held that the agreement between the parties indicated that the transaction was a lease of the trawler in favour of the transferee and that for a period of ten months, the trawler was to remain in the exclusive possession of the transferee, and at the end of the period it was to be sold to it. We do not think that the said decision would apply to the facts of the present case. Then, we now come to the aspect referred to in paragraph 4B above, in relation to the question referred to us in Tax Case No. 1651 of 1986, viz., whether in respect of the bulldozer, the assessee therein could claim the abovesaid allowance. According to learned counsel for the Revenue, relying on the terminology used in section 32A(2)(b)(iii), a bulldozer cannot be considered as " machinery or plant installed .... in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing.... " In this connection, the decision in CIT v. N. C. Budharaja and Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of one of the statutory conditions prescribed in section 32A(2)(b)(iii) of the Act, in relation to the bulldozer hired out by the assessee. So, as per the abovesaid decision of the Supreme Court that aspect must be deemed to have been dealt with by the Tribunal and, therefore, it is one arising out of its order. The net result is, in Tax Cases Nos. 491 and 492 of 1986 the second question referred to us both in relation to investment allowance under section 32A as well as initial depreciation under section 32(1)(vi) is answered in the affirmative and against the Revenue. In so far as the first question referred to us in both the said tax cases is concerned, in view of what is stated in paragraph 7 (at page 460) above, it is held that there is no necessity to answer this first question and the said first question is returned unanswered accordingly. In so far as Tax Case No. 786 of 1986 is concerned, the question referred to us is answered in the negative and against the Revenue. In so far as Tax Case No. 1651 of 1986 is concerned, taking into account only the abovereferred to subsidiary question, whether with reference to the bulldozer the assessee is entitled to the allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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