COMMISSIONER OF INCOME TAX Vs. K S CHANDRASEKARAN

JUDGEMENT

(1.) IN all these tax case references under section 256 (1) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), one common question is involved (apart from certain other questions in one or the other of the said cases) and hence they are heard together Of these, one alone, viz. , Tax Case No. 786 of 1986, is by the assessee since the Tribunal below therein held against the assessee on the abovesaid question. The other five tax case references are by the Revenue. The Tribunal, in the respective orders therein, held against the Revenue on the abovesaid question Tax Cases Nos. 491 and 492 of 1986 arising out of the same order dated May 8, 1985 , of the Tribunal, in the appeal by the Revenue as well as cross-objection by the assessee, relate to the assessment year 1977-78. The assessee herein is the same as in Tax Case No. 786 of 1986, which relates to the assessment year 1979-80 and arises out of the order dated October 31, 1983 , of the Tribunal. Tax Case No. 1651 of 1986 relates to another assessee in relation to the assessment year 1980-81 and arises out of the order dated August 30, 1985, of the Tribunal. Tax Case No. 1242 of 1991 which relates to the assessment year 1983-84 and Tax Case No. 1243 of 1991 which relates to the assessment year 1984-85, both arise out of the order dated February 8, 1990, of the Tribunal. Both these later two cases relate to yet another assessee The abovesaid "common question" is about the investment allowance under section 32a of the Act, which is one of the deductions allowed in computing the "total income" chargeable to tax under the Act. The abovesaid allowance is given with effect from April 1, 1976, the said provision having been inserted in the Act by the Finance Act, 1976, and the said allowance has taken the place of development rebate allowance which was given earlier. The said allowance, under section 32a, is given, inter alia, in respect of plant and machinery. All the abovesaid assessees, who admittedly owned the plant or machinery in question, only hired out , the same to another for being exploited by the latter. Therefore, the contention of the revenue is that the assessee was not entitled to the said allowance, it having not exploited the said plant or machinery itself. On the other hand, the contention of the abovesaid assessees is that despite the abovesaid fact, each one of them was entitled to the allowance under the said section. IN view of these rival contentions, the abovesaid question is whether the assessees were entitled to the abovesaid investment allowance under the abovesaid section in the abovesaid relevant assessment years in respect of the respective plant or machinery, which admittedly was owned by the respective assessees but hired out during the relevant previous years as stated abovewith reference to the said "common question" the sole question of law referred to us in Tax Case no. 786 of 1986 runs as follows : "whether the Appellate Tribunal was right in holding that the assessee was not entitled to investment allowance under section 32a of the Act "" * Likewise, in both Tax Cases Nos. 1242 and 1243 of 1991, the question of law referred to us, runs as follows "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee is entitled to investment allowance under section 32a on items of machinery and plant which have been leased out to others"" * IN Tax Case No. 1651 of 1986, the question of law referred to us runs as follows "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to investment allowance under section 32a on the bulldozer purchased and hired to outsiders, even though the assessee's business was only hiring of compressors and bulldozers"" * (With reference to this question, another question also has to be considered in the light of the arguments advanced, viz. , whether in respect of the bulldozer, the assessee in the said case could claim the said allowance. This aspect would be considered after considering the abovereferred "common question") IN both Tax Cases Nos. 491 and 492 of 1986, actually speaking, two questions of law have been referred to us and the abovesaid "common question" involved is reflected only in the second of the abovesaid questions referred to us, which runs as follows "whether the Appellate Tribunal was correct in law in holding that the assessee is entitled to investment allowance under section 32a and initial depreciation under section 32 (1) (iv) of the Act on machinery leased out"" * IN the above question, reference to section 32 (1) (iv) is not correct it must read as section 32 (1) (vi ). The said provision refers to initial depreciation. As per learned counsel for the Revenue, the arguments advanced in respect of investment allowance would apply to the said initial depreciation also and the decision to be given in respect of investment allowance in regard to the actual question at issue would also equally apply to initial depreciation. Then, the first of the abovesaid two questions referred to us, runs as follows "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding and had valid materials to hold that the reopening of the assessment under section 147 (b) of the Act was without jurisdiction and, therefore, invalid "" * Regarding this first question, learned counsel for the revenue submits that if the abovesaid "common question" is answered in favour of the assessee, there may not be any necessity to answer this first question and so saying he deferred his arguments on the said first question till our decision is given on the abovereferred common question. However, we may, at this stage itself state that, since in view of the reasons given below, we are going to decide in favour of the assessee on the abovesaid common question, there is no necessity to answer the abovereferred first question and the said first question has to be returned unanswered Let us now deal with the abovesaid "common question" first. The material portions of the said section 32a of the Act run as follows "32a. (1) IN respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed. . . . of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :--