COMMISSIONER OF INCOME TAX Vs. CHANDA DIESELS

JUDGEMENT

(1.) THIS is a reference at the behest of the Revenue to answer the following question : 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the assessee was entitled for deduction under section 80HH of the Income -tax Act, 1961 ?'

(2.) THE assessee, Chanda Diesels, a partnership firm, had claimed in the return of income for the assessment year 1978 -79 deductions under (i) section 32A, (ii) section 80HH of the Income -tax Act, 1961 ('the I.T. Act'). Both the deductions were disallowed by the Income -tax Officer as well as the Appellate Assistant Commissioner. The Tribunal, however, allowed the deduction on both the counts and at the instance of the Revenue made this reference only in respect of deduction allowed under section 80HH.

(3.) SECTION 32A(1) permits deduction of investment allowance equal to 25 per cent. of the cost of ship, aircraft, machinery or plant owned by the assessee and wholly used for the purposes of the business carried on by him. Sub -section (2) specifies the ship or aircraft or machinery or plant covered by sub -section (1). Sub -clauses (b) (i), (ii) and (iii) of section 32A(2) refer to a new machinery or plant installed after March 31, 1976. The Tribunal came to the conclusion that the case of the assessee fell under section 32A(2)(b)(ii). In other words, it was accepted that the 'new machinery was installed after the 31st day of March, 1976, in a small -scale industrial undertaking for the purpose of business of manufacture or production of any article or thing'.