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TMI Blog1991 (8) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts of the case in disallowing Rs. 1,14,299 under section 40(c) of the Income-tax Act, 1961, while the assessment officer had disallowed Rs. 2,18,930 under section 40A(5) of the Income-tax Act, 1961. Without prejudice the balance of Rs. 1,14,299 should also be allowed. 3. The arguments of the learned counsel for the assessee and the learned Departmental Representative were heard. 4. The assessee-company is engaged in the sales and service of navigational electronic equipment to Indian ships. Apart from this, the company had also secured a contract from the Oil Natural Gas Commission (O.N.G.C.) for carrying out hydrographic survey of the current velocity pattern between sea-bed and the surface surrounding the Indian sub-contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide continuous position of moving oil exploration vessel and guides it to reach the designated point for placing oil production platform. (b) It is used for pre and post calibrating Radio positioning chain accurately to meet the clients stringent requirements. The pre and post calibration of R.P. Chain is carried out in the presence of clients representative and to his satisfaction before actual deployment. (c) To measure distance between group of offshore structure for joining them to make them one composite offshore oil production platform. END USE : The activity carried out by utilisation of this equipment results in the positioning of a rig in an appropriate site resulting in the extraction and subsequently production of oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to any investment allowance under section 32A on the cost of such equipment. 6. Assailing the impugned order of the learned CIT(A), the learned counsel for the assessee submitted that the tellurometer was an equipment which was used in the hydrographic survey of Bombay offshore. Such survey was essential and pre-requisite for drilling and production of oil by the O.N.G.C. The tellurometer was used in surveying the sea-offshore and it delivered reports which were used for drilling operations leading to the production of the end-product, viz. oil. Since the use of the tellurometer was instrumental in producing oil, the survey activity carried on by the assessee can validly be treated as one instrumental in producing oil and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd studied the material made available to us and the case-law relied upon by the learned counsel for the assessee, but find absolutely no ground for interfering in the finding of the learned CIT(A) on this point. It is an admitted position that the assessee itself does not produce oil. The activity of production of oil is engaged into by the O.N.G.C. which has awarded the contract of hydrographic survey to the assessee. The dispute then boils down to the question as to whether the assessee, by conducting the survey and by using the tellurometers in the course of such survey operations, produces a thing or article so as to invite the application of section 32A of the Act. To this query, our answer can be only positive, no. Neither the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2 we find that during the year in question, the following items of expenditure were incurred by the assessee, viz. : Depreciation on Flat Furniture Rs. 7,852 Repairs and maintenance of flat Rs. 2,04,447 Dep. on Air-conditioner Rs. 4,000 --------------------- Rs. 2,16,299 The assessing officer took into consideration these items of expenditure for the purpose of computation of disallowance under section 40A(5). The learned CIT(A) has confirmed the assessing ofricer's action in talking this expenditure into consideration for the purpose of disallowance, but instead of section 40A(5) he has applied - and in our opinion rightly - section 40(c) for the reason that the amenity of flat and furniture was provided to a director-empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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