COMMISSIONER OF INCOME-TAX vs. BHARAT VIJAY CONSTRUCTION CO

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ITR/134/1989HC GujaratGJHC24012914198906 March 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Tribunal was not right in law in concluding that the assessee was entitled to Investment Allowance of Rs. 6,62,750/- under Section 32A of the Act, 1961. The Court relied on the Supreme Court's decision in C.I.T. v. N.C. Buddharaja & Co. (204 ITR 412), which clearly held that sub-clause (iii) of clause (b) of sub-section (2) of Section 32A of the Act does not include within its ambit the construction of a dam, a bridge, a building, a road, a canal, and other similar constructions. Therefore, the Tribunal had committed an error in allowing the investment allowance. The question referred to the High Court was answered in the negative, in favour of the Revenue and against the assessee. The reference was disposed of accordingly.

What were the facts?

The assessee, Bharat Vijay Construction Co., a firm engaged in constructing bridges, roads, and dams, claimed Investment Allowance of Rs. 6,62,750/- under Section 32A of the Income Tax Act, 1961, for the assessment year 1982-83. The Income Tax Officer (ITO) rejected the claim. However, the Commissioner of Income Tax (Appeals) allowed it, relying on the Orissa High Court's decision in N.C. Buddharaja & Co. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s order, dismissing the Revenue's appeal. The Revenue then filed a reference to the High Court of Gujarat.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the assessee is entitled to Investment Allowance of Rs. 6,62,750/- under Section 32A of the Income Tax Act, 1961? Assessee's Contention: The assessee claimed Investment Allowance on machinery and plant installed for its business of constructing dams and canals. The CIT(A) and the Tribunal allowed the claim, following the Orissa High Court's decision in N.C. Buddharaja & Co. (121 ITR 212). Revenue's Contention: The Revenue contended that the assessee was not entitled to investment allowance. The Supreme Court's decision in C.I.T. v. N.C. Buddharaja & Co. (204 ITR 412) was later cited, which held that sub-clause (iii) of clause (b) of sub-section (2) of Section 32A does not cover construction of dams, bridges, buildings, roads, canals, and similar constructions.

Which sections of the Income-tax Act were involved?

Section 32A,Section 256(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 134 of 1989 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? -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus BHARAT VIJAY CONSTRUCTION CO -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 06/03/98

ORAL JUDGMENT Per: R.K.Abichandani, J.

The Income Tax Appellate Tribunal has referred the following question to this Court for its opinion under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act, 1961"):

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee is entitled to Investment Allowance of Rs.6,62,750/- under Section 32A of the I.T.Act?"

2.

In its Return for the assessment year 1982-83, the assessee-firm which carried on the business of constructing bridges, roads, dams, etc., claimed deduction of Investment Allowance under Section 32A of the Act, 1961. The I.T.O. rejected the claim. However, the C.I.T. (Appeals) accepted the assessee's claim following the decision of the Orissa High Court in the case of N.C.Buddharaja & Co. reported in 121 I.T.R. 212. The Tribunal, following its earlier decision confirmed the order of the C.I.T. (Appeals) and dismissed the appeal of the Revenue.

3.

In C.I.T. v. N.C.Buddharaja & Co., reported in 204 I.T.R. 412, the Hon'ble Supreme Court, while considering the question as to whether the assessee was entitled to investment allowance on the actual cost of the machinery and plant installed for the purpose of its business pertaining to construction of dams and canals under Section 32A of the said Act, in terms held that sub clause (iii) of clause (b) of sub-section (2) of Section 32A of the Act does not comprehend within its ambit, construction of a dam, a bridge, a building, a road, a canal and other similar constructions. In view of this decision of the Hon'ble Supreme Court, we hold that the Tribunal committed an error in coming to the conclusion that the assessee was entitled to Investment Allowance of Rs.6,62,750/- under Section 32A of the Act, 1961. The question is therefore answered in the negative in favour of the Revenue and against the assessee. The Reference stands disposed of accordingly with no order as to costs.

(R.K.Abichandani, J.)

(Kundan Singh, J.)

(sunil)

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