HYDERABAD INDUSTRIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Income-tax Appellate Tribunal, Hyderabad Bench-A, Hyderabad, referred the following question, said to arise out of its order in ITA No. 78 of 1985, dated September, 19, 1988, for the assessment year 1980-81, under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act").

(2.) THE brief facts leading to the above reference are that the assessee is a public limited company carrying on the business in manufacture and sale of asbestos cement products. During the previous year, relevant to the assessment year, the assessee installed new machinery costing Rs. 1,31,58,308 and claimed investment allowance at 25 per cent. of the said cost. THE said machinery includes data processing machine, the cost of which is Rs. 2,65,620. THE Assessing Officer while framing the assessment excluded the said item, i.e., data processing machine, on the ground that the same is an office appliance and therefore, the assessee is not entitled for investment allowance. This was contested by the assessee before the Commissioner (Appeals). THE Commissioner (Appeals) allowed the claim of the assessee, placing reliance upon the judgments of the Bombay High Court in CIT v. I.B.M. World Trade Corporation and CIT v. International Computers Ltd. . According to the finding of the Commissioner (Appeals) in view of the above decisions, the data processing machine would not be considered an office appliance and therefore, the assessee is entitled for investment allowance. This was contested by the Department in appeal before the Income-tax Appellate Tribunal (for short, "the Tribunal"). Though the Tribunal negatived the contention of the Department that the said data processing machine has to be considered as an office appliance in view of the decision of the Bombay High Court, but, however, it further considered the claim with reference to the items mentioned in the Eleventh Schedule to the Act and felt that the data processing machine could be considered as an item mentioned in item No. 22 of the Eleventh Schedule and therefore, it is not entitled for investment allowance, especially in the light of the Explanation under item No. 22 of the Eleventh Schedule, which had widened the scope of the items mentioned therein. Aggrieved by the said finding of the Tribunal, the assessee sought the reference.

(3.) BEFORE considering the rival contentions of the parties, it would be appropriate to refer to the relevant provisions of the Act.