JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion of this court :
1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was, in law, justified in holding that the claim of investment allowance is allowable ?
2. Whether, on the facts and in the circumstances of the case and material available on record, the Income-tax Appellate Tribunal was justified in law, in deleting the addition made being payment of interest exceeding 15 per cent, on the deposits ?
2. The present reference relates to the assessment year 1983-84.
3. Briefly stated the facts giving rise to the present reference are as follows :
The respondent-company is engaged in the business of construction of tunnels, bridges, roads, etc. It claimed investment allowance under Section 32A of the Act. It had also paid interest amounting to Rs. 59,622 and Rs. 63,943 for the assessment years 1982-83 and 1983-84, respectively, which was more than 15 per cent. The Assessing Officer in the course of the assessment proceedings disallowed the investment allowance as also the amount of interest paid in excess over 15 per cent, on the ground that it is against the provisions of the Companies (Acceptance of Deposits) Rules. Feeling aggrieved the respondent preferred an appeal before the Commissioner of Income-tax (Appeals) who had allowed the claim of investment allowance as also the entire amount of interest paid by the respondent on the deposits. While doing so the Commissioner of Income-tax (Appeals) has relied upon a decision of the Tribunal of the Delhi Bench in the case of CIT v. Hydel Construction Company. He further found that the provisions of the Companies (Acceptance of Deposits) Rules do not apply to deposits, which are neither renewed nor freshly accepted during the relevant period. The order of the Commissioner of Income-tax (Appeals) has been upheld by the Tribunal.
4. We have heard Sri A.N. Mahajan, learned standing counsel for the Revenue, Sri R.P. Agarwal, and Sri S.P. Gupta have filed their appearance on behalf of the respondent-company.
5. We find that the apex court in the case of CIT v. N.C. Budharaja and Co. , has held that the activity of construction of dam does not amount to manufacture or production of an article or thing and, therefore the undertaking is not entitled for investment allowance.
6. Respectfully following the aforesaid decision we are of the considered opinion that the Tribunal was not justified in allowing the claim of investment allowance under Section 32A of the Act.
7. So far as disallowance of interest paid in excess of 15 per cent, on deposits are concerned, it may be mentioned here that the Commissioner of Income-tax (Appeals) has found that the provisions of the Companies (Acceptance of Deposits) Rules apply to fresh deposits and not to old deposits, which have neither been renewed nor freshly accepted during the relevant period. In view of the specific finding recorded by the Commissioner of Income-tax (Appeals), which has been affirmed by the Tribunal that neither any deposit has been renewed nor any fresh deposit has been accepted during the relevant assessment year, the provisions of the Companies (Acceptance of Deposits) Rules would not be applicable. We, therefore, uphold the order of the Tribunal in deleting the addition made being payment of interest exceeding 15 per cent, on the deposits.
8. In view of the foregoing discussion, we answer the first question in the negative, i.e., in favour of the Revenue and against the assessee and the second question referred to us is answered in the affirmative, i.e., in, favour of the assessee and against the Revenue. However, there shall be no order as to costs.