COMMISSIONER OF INCOME TAX vs VIJAY GRANITES (P) LTD.

R. Jayasimha Babu, J.

The assessee is engaged in trade. It also owns machineries, which it has leased out to others for the purpose of mining. It purchases mineral mined

with the aid of those machines, and carries on business in the trading of those minerals. It claimed investment allowance in respect of those

machineries. The Tribunal has held relying on the resolution of the Board of Directors of the company, that the assessee also carries on business of

trading, and on that ground, has allowed investment allowance for the assessment year 1983-84.

The revenue being aggrieved, has caused this reference to be made. The question referred to us is :

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 machineries leased out to other concerns ?

The assessee is a granite company, as is evident from its name. It as noticed by the Tribunal does not hold a mining lease. It has purchased

equipment used for mining and has leased to others, who held the leases. It purchases mineral, that is mined and carries on business in those

minerals. The business of the assessee is clearly that of trade in minerals and not the business of leasing. Apparently it had leased the machinery to

others who held a mining lease as the assessee itself did not held the mining lease. The object was to buy the mineral that was extracted and to

carry on trade therein, The leasing out the machinery, therefore, cannot be regarded as a business of the assessee, and the machinery leased cannot

be regarded as wholly used for the purpose of leasing. A resolution by the company''s Board agreeing to lease the machinery does not by itself

establish that the company was engaged in the business of leasing to satisfy the requirements of section 32A of the Act.

This court, in the case of Commissioner of Income Tax Vs. Sivananda Colour Works, , in similar circumstances, held that the assessee therein

who also had purchased machinery and leased out the same for the purpose of mining, though its primary business was not leasing of machinery,

the assessee therein was not entitled to investment allowance.

As the business of the assessee was not that of leasing out machineries for the purpose of mining, the lease that it had granted to holder of a

mining lease with whom it had arrangements for the purchase of the minerals and was marketing the same, such lease would not be sufficient to

entitle the assessee the benefit of investment allowance. The assessee had acquired the machinery only for the purpose of mining, and as it did not

have the lease, had ''given it to another who held a lease so that it could carry on trade in the mineral. Its business was trading in minerals. The

assessee. Therefore, was not entitled to the investment allowance claimed.

The question referred to us is, therefore, answered in favour of the revenue, against the assessee. No costs.

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