SURYODAYA CONSTRUCTION CO. vs. COMMISSIONER OF INCOME-TAX

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ITR/208/1986HC GujaratGJHC24010832198615 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was correct in its conclusion that the assessee was not entitled to investment allowance under Section 32A of the Income-tax Act, 1961. The Court relied on the Supreme Court's decision in C.I.T. vs. N.C.Buddharaja, which held that an assessee engaged in the business of construction of dams, roads, bridges, or canals, or similar constructions, was not entitled to investment allowance under Section 32A. The Supreme Court clarified that the provision did not encompass such construction activities within the meaning of "manufacturing or production of any article or thing." Therefore, the High Court answered the referred question in the affirmative, against the assessee and in favour of the Revenue. The reference was disposed of accordingly.

What were the facts?

The assessee, Suryodaya Construction Co., claimed investment allowance under Section 32A of the Income-tax Act, 1961, on the cost of machinery. The Income Tax Officer (ITO) rejected the claim, holding that construction and structural work did not qualify as "articles or things." This decision was upheld on appeal. The Income-tax Appellate Tribunal (Tribunal) also ruled against the assessee, finding them ineligible for the investment allowance. The Tribunal referred a question of law to the High Court of Gujarat at Ahmedabad for its opinion.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to investment allowance under section 32A of the Income-tax Act, 1961? Assessee's Contention: The assessee claimed investment allowance on the cost of machinery, asserting they fulfilled the required conditions. Revenue's Contention: The revenue, through the ITO and subsequent appellate authorities including the Tribunal, contended that the business of construction of buildings did not make the assessee eligible for investment allowance. They argued that construction and structural work did not fall within the meaning of "articles or things" as contemplated by Section 32A(2)(b)(iii). The revenue relied on the Supreme Court's decision in C.I.T. vs. N.C.Buddharaja.

Which sections of the Income-tax Act were involved?

Section 32A,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 208 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- SURYODAYA CONSTRUCTION CO. Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: SERVED BY RPAD - (N) for Petitioner MR Mihir Joshi for MANISH R BHATT for the Respondent

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CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 15/04/98

ORAL JUDGEMENT

The Income-tax Appellate Tribunal has referred the folllwing question for the opinion of this Court under section256(1) of the Income-tax Act, 1961. "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee was not entitled to investment allowance under section 32A of the Income-tax Act, 1961 ?"

2.

The assessee claimed investment allowance on the cost of machinery on the basis that it fulfilled required conditions for the purpose of the claim. The I.T.O. however negatived the case holding that the construction and structural work did not come within the meaning of "articles or things". This decision was confirmed in the appeal on the basis that the assessee engagaged in the business of construction of buildings was not eligible for investment allowance. The Tribunal also held that the assessee was not entitled to investment allowance as claimed. Similar question came to be considered by the Hon'ble Supreme Court in the case ***darji

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