Commissioner of Income Tax vs Mahindra Ugine Steel Co. Ltd.

B.P. Saraf, J.—By this reference u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred the following questions of law for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing depreciation and investment allowance on the technical know-how holding it to be in the nature of plant ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to investment allowance on weighing scale and mobile crane under the provisions of Section 32A(2)(b)(iii) of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the reimbursement of medical expenses granted to the employees could not be treated as ''perquisites'' for the purpose of Section 40A(5) of the Income Tax Act, 1961 ?"

Learned counsel for the parties are agreed that question No. 1 is covered by the decision of the Supreme Court in Scientific Engineering House (P) Ltd. Vs. Commissioner of Income Tax, Andhra Pradesh, . In view of the above, we answer question No. 1 in the affirmative and in favour of the assessee.

Learned counsel are further agreed that question No. 3 is also covered by the decision of this court in Commissioner of Income Tax, Bombay City-II Vs. Indokem Private Ltd., and decision of the Supreme Court in Commissioner of Income Tax, Bombay, etc. Vs. M/s. Mafatlal Gangabhai and Co. (P) Ltd., . In view of the above, question No, 3 is answered in the affirmative and in favour of the assessee.

The only dispute that requires our consideration is the dispute in question No. 2 about the entitlement of the assessee to investment allowance u/s 32A(2)(b)(iii) of the Income Tax Act, 1961, ("the Act"), in respect of weighing scale and mobile crane. The assessment year involved is the assessment year 1978-79. On the factual matrix, there is no controversy between the parties that the weighing scale and mobile crane are plant. There is also no dispute about the fact that these plants were used by the assessee for the purpose of its business. The only controversy is in regard to the fulfilment of the requirement of Sub-section (2) of Section 32A of the Act, which requires that the machinery or plant should be installed for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. Learned counsel for the Revenue submits that there is no material on record in this case to show that the weighing scale and the mobile crane meet the description of the machinery or plant specified in Sub-section (2) of Section 32A of the Act. In other words, according to him, there is nothing on record to show whether the said weighing machine and mobile crane were used by the assessee for the purpose of its business of manufacture. He, therefore, submits that question No. 2 may be remitted to the Tribunal to decide afresh. Learned counsel for the assessee Mr. Sathe, on the other hand, submits that keeping in view the nature of the business of the assessee which was manufacturing of special alloys, it is obvious that the machineries in question were used by the assessee for the purpose of the business of manufacture and no other purpose. Learned counsel urged that the business of the assessee was, admittedly, manufacture of special alloys and the weighing scale and mobile crane were used for that business. That being so, the answer to question No. 2 according to learned counsel, is obvious.

We have carefully considered the rival submissions of learned counsel for the parties. Admittedly, the business of the assessee in this case was manufacture of special alloys. There is also no dispute about the fact that the machineries in question, viz., weighing scale and mobile crane, were used by the assessee for its business which, admittedly, was manufacture of special alloys. That being so, it is obvious that the weighing scale and mobile crane having been used by the assessee for the purposes of its business of manufacture of articles, viz., special alloys, meet the description of the machinery specified in Sub-clause (iii) of Clause (b) of Sub-section (2) of Section 32A of the Act and the assessee was entitled to investment allowance u/s 32A in respect thereof. In such a case, in our opinion, it will be an empty formality to remit the matter to the Tribunal to record a finding that these two machineries were used by the assessee for the purpose of the business of manufacture of articles or things because that factual position is obvious from the very nature of the business of the assessee. In view of the above, we answer question No. 2 in the affirmative and in favour of the assessee.

This reference is disposed of accordingly with no order as to costs.