THE C.I.T.JALANDHAR vs. M/S SUKHJIT STARCH & CHEMI.LTD.

ITR/92/1989HC Punjab & HaryanaPHHC01022631198914 March 2007Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE M.M. KUMAR4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the assessee is entitled to investment allowance on new machinery in the year of installation even if it was not put to use in that year. The Court reasoned that the non-use of machinery in the accounting year does not change its character from new machinery. The object of Section 32A is to encourage industrialization. Furthermore, the Court noted that Section 32A itself provides an option to the assessee to claim investment allowance either in the year of installation or in the year when the machinery is first put to use, if that year is subsequent to the year of installation. This view was supported by the Madras High Court's decision in Commissioner of Income Tax, Tamil Nadu-I v. Vayithri Plantations Ltd. (1981) 128 ITR 675, which held that machinery kept ready for use is considered 'used' for the purpose of business, and forced idleness does not disentitle the assessee from the allowance. The question was answered against the revenue and in favour of the assessee. No issue was left undecided.

What were the facts?

The assessee, M/s Sukhjit Starch & Chemicals Limited, Phagwara, claimed investment allowance of Rs. 33,58,000/- on new machinery for the assessment year 1982-83. The machinery was installed and paid for during the relevant accounting period but was not put to use. The Assessing Officer disallowed the claim, but the Commissioner of Income Tax (Appeals) allowed it. The revenue appealed to the Income Tax Appellate Tribunal, which upheld the CIT(A)'s decision. The revenue then filed a High Court reference, challenging the Tribunal's order dated 24.2.1987.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to investment allowance on new machinery in the year of installation even if it was not put to use in that year? (Question of law, turning on Section 32A of the Income Tax Act, 1961). Assessee's Contention: The assessee claimed investment allowance on machinery installed and paid for in the relevant year, even though it was not put to use. The CIT(A) and the Tribunal allowed this claim. Revenue's Contention: The revenue argued that investment allowance is not admissible if the new machinery was not put to use in the accounting year relevant to the assessment year 1982-83. The revenue approached the High Court against the Tribunal's order.

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 Punjab and Haryana at Chandigarh I.T.R. No. 92 of 1989 Date of Decision: 14.03.2007 The Commissioner of Income-Tax, Jalandhar …Petitioner Versus M/s Sukhjit Starch & Chemicals Limited, Phagwara …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE RAJESH BINDAL Present: Mr. Sanjeev Bansal, Advocate, for the petitioner-revenue.

JUDGMENT M.M. KUMAR, J. The revenue has approached this Court by raising the following question of law under Section 256(1) of the Income Tax Act, 1961, which is claimed to have arisen out of the order of the Income Tax Appellate Tribunal, Amritsar, from its order dated 24.2.1987 while deciding ITA No. 707(ASR)/1985, in respect of assessment year 1982-83:- “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to investment allowance on new machinery in the year of instalation even if it was not put to use in that year?”

ITR No. 92 of 1989 The assessee had claimed investment allowance on plant and machinery on the value of Rs. 33,58,000/-. There is no dispute that the machinery was installed in the accounting period relevant to the assessment yea

The order continues below.

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