Cit Agra vs Mahesh Shoe Factory

ORDER

1. The Income Tax Appellate Tribunal, Delhi has referred the following question of law under section 256(1) of the Income Tax Act, 1961, hereinafter referred to as "the Act" for opinion to this Court:

"Whether in the facts and circumstances of the case the Hon'ble Tribunal was justified in law in holding that the deduction on account of investment deposit account and allowable to the assessee under section 32AB of the Income Tax Act, 1961 on generator?"

The present reference relates to the assessment year 1987-88.

2. Briefly stated the facts giving rise to the present reference as follows:

During the assessment year in question the respondent-assessee which has been assessed to income-tax in the status of a registered firm has purchased generator. It had claimed investment deposit allowance under section 32AB of the Act to the extent of Rs. 74,332 on the purchase of generator which has been disallowed by the assessing officer on the ground that it was not part of the machinery and plant which is used for production of shoes and shoe uppers. According to the assessing officer the generator was an alternative arrangement of generating electricity in case of need which would activate the machinery used for production. Feeling aggrieved the respondent preferred an appeal before the Commissioner (Appeals) who had accepted the claim of the respondent-assessee. The Commissioner (Appeals) quoted Appendix I of the Income Tax Rules in support of the finding that the generator has been categorized as plant and machinery. He has followed the decision of the Tribunal in ITA No. 3543/Del./81 wherein it has been held that generator is electric machinery and eligible for depreciation under the head 'Machinery and Plant'. The revenue, feeling aggrieved preferred an appeal before the Tribunal. The Tribunal has upheld the order passed by the CIT(A) on the finding that the generator was admittedly used for activating the machinery for the production of shoes and shoe uppers and the fact that as per Appendix I of the Income Tax Rules, generator was categorized as plant and machinerv.

3. We have heard Sri S. Chopra, learned standing counsel for the revenue. No body has appeared appearing on behalf of the respondent-assessee.

4. Under section 32AB of the Act an assessee, whose total income includes income chargeable to tax under the head 'Profits and gains of business or profession' is entitled for deduction in respect of the amount during the previous year for purchase of any new ship, new aircraft, new machinery or plant, subject to the maximum limit of 25 per cent of the profits of the business or profession. The words 'plant and machinery, has not been defined under section 32AB of the Act and, therefore, the general meaning given for the plant and machinery has to be taken into consideration. We find that for the purpose of depreciation in the Act the generator is being treated as plant and machinery under Appendix I of the Income Tax Rules. This court in CIT v. Rai Vijay Corpn. (2005) 278 ITR 348 (All), has held that investment allowance under section 32A of Act in respect of generator which is the part of plant and machinery is allowable. in this view of the matter we find no legal infirmity in the order of the Tribunal.

5. We, accordingly, answer the question refer-red to us in the affirmative i.e., infavour of the assessee and against the revenue. However, there shall be no order as to costs.