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TMI Blog1993 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... he machinery used by the assessee for boring operation for extracting water from underground ?" The assessee, a limited company, had been carrying on coal mines and boring operations. After nationalisation of the coal mines, the assessee-company had been carrying on business of boring operations for extracting water from underground. The assessee had claimed investment allowance under section 32A in respect of its machinery used in boring operations. It is not in dispute that the machinery are new. The dispute relates to the question whether the plant and machinery used for boring to extract sub-soil water would be eligible for investment allowance under section 32A. The Assessing Officer held against the assessee as, according to him, bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drilling operations do not produce any article or thing by reason only of the fact that underground water is drawn out to the surface. Learned counsel for the assessee placed reliance on the decision of the Andhra Pradesh High Court in CIT v. Super Drillers [1988] 174 ITR 640. There, the Andhra Pradesh High Court decided that new plant and machinery owned by the assessee who used them for the purpose of the business of drilling bore wells are entitled to investment allowance. In the case before the Andhra Pradesh High Court, the assessee-firm carried on the business of drilling bore wells. It was found as a matter of fact that drilling equipment was used by the assessee-firm for the purpose of business carried out by it in order to bring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal but the decision required a study with more discernment than manifest in the Tribunal's order. It would be simplistic to take the view that drilling operations for the drawing of underground water in all cases invariably amount to production of water as a thing. The decisive factor is the purpose of the drawing of the water. Water can be drawn from underground simply for the purpose of making the underground pockets water-free as is done in the case of mining operations. Therefore, the Departmental representative while arguing drilling as part of mining operation was correct. But that observation may not be applicable in the present case because after nationalisation the assessee is prohibited from carrying out any mining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inside the mines. If the purpose is purely subterranean, then we cannot say that the assessee is producing any article or thing. Mere physical emergence of water does not necessarily constitute in the commercial sense production of an article or thing. Any mechanical operation may, for a purpose, incidentally produce things but of no surface use. In such a situation, it cannot be said that such non-commercial thing would also be a thing for the purpose of section 32A because the word "thing" in its setting necessarily refers to a commercial thing. In point of fact, the sub-soil water drawn to surface ground, far from having a commercial potential, may be unwholesome and injurious to the surface environment. The Tribunal has not looked int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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