COMMISSIONER OF INCOME TAX Vs. N VENKATARAMAN

JUDGEMENT

(1.) THE question of law that arises in the reference at the instance of the Depaitment is whether the assessee is entitled to claim investment allowance in respect of the air compressor under section 32A of the Income Tax Act, 1961 (hereinafter to be referred to as "the Act") used by it for +the purpose of sand blasting in the computation of income for the assessment year 1983-84.

(2.) THE aSsessee is a registered firm and the assessee clanned during the course of assessment proceedings for the assessment year 1983-84, investment allowance of a sum of Rs. 53,027 in respect of the air compressor installed by it. THE case of the assessee was that the air compressor was used for the purpose of sand blaSting which is a scientific method of surface treatment of metal before appilying protective paints THE Income Tax Officer rejected the claim on the ground that the assessee had merely used the air compressor for treatment of metal and the assessee had not produced or manufactured any thing or article as required under s. 32A of the Act and hence the assessee is not entitled to claim of investment allowance in the computation of its income.

(3.) MR. G. Ashokpathy, learned counsel for the assessee, on the other hand, submitted that the conditions prescribed in section 32A are fully satisfied and the assessee is engaged in the manufacture or production of articles or things and it is not necessary that the ultimate product should be produced by the assessee. Learned counsel submitted that both the Commissioner (Appeals) and the Tribunal nave found that the air compressor was used for the manufacture and production of articles or things and the assessee was the owner of the air compressor and in the course of the assessee's business, the air compressor was used and, therefore, all the requirements of section 32A of the Act are fully satiSfied, Learned counsel for the assessee referred to the decision of the, Kainataka High Court in the case of CIT v. Mahant Oil Industries (P) Ltd. and submitted that section 32A of the Act should receive a liberal construction to effectuate the basic idea behind the provision and the Karnataka High Court held that the assessee would be entitled to investment allowance on the storage tank installed by it for the purpose of its business of oil production. Learned counsel also submitted that the decision in CIT v. Perfect Liners (supra) actually supports the case of the assessee as the Tribunal had found that the process employed was essential for the manufacture of articles. Learned counsel for the assessee also referred to the decision of this Court in CIT v. First Leasing Co. of India Ltd. and also decision of the Supreme Court in CIT v. Shaan Finance (P) Ltd. (supra) and submitted that the investment allowance is allowable in case where the assessee hired out its machinery during the course of its business of hiring and the case of the assessee stands in a strong footing as the assessee has utilised the machinery in the course of manufacture of the product.