Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income-Tax vs Maheshwari Bros. on 8 October, 1991
Equivalent citations: [1992]40ITD206(DELHI)
ORDER
M.C. Agarwal, Judicial Member
1. This is an appeal by the revenue arising out of the assessee's assessment for assessment year 1985-86. The only point arising in this appeal is whether the assessee is entitled to investment allowance in respect of kolhus and pans which were given on hire to farmers. The Assessing Officer negatived the assessee's claim on the ground that the kolhus and pans had been given on hire and were not used by the assessee itself for producing goods.
2. On appeal, the learned AAC accepted the assessee's claim observing as under :-
5. I find that the appellant invested an amount of Rs. 90,754 on new kolhus and pans. These kolhus and pans were used by the farmers for production though not used by the appellant firm. The appellant-firm gave these kolhus and pans on hire to the farmers for production, As these are used for production, the appellant firm is entitled to investment allowance on the same. The ITO is, therefore, directed to allow the same as per provisions of law.
3. The learned departmental representative contended that since the assessee is not using the kolhus and pans for production of articles or things and has given them for hire, it is not entitled to investment allowance. It was also contended that even if a hirer is entitled to investment allowance, the present assessee would not be entitled because the kolhus and pans are not being used in an industrial undertaking for the business of production of any article or thing. According to him, a kolhu run by a farmer for processing his own agricultural produce, i.e., sugarcane and producing 'gur' is not an industrial undertaking and the farmer while producing gur does not do so in the course of a business of manufacture or production of any article or thing. According to him, the activity of a farmer in running a kolhu and producing 'gur' from sugarcane is an agricultural activity and not an industrial or a business activity. The learned counsel for the assessee on the other hand relied on a judgment of the Hon'ble Allahabad High Court in CWT\. JethaNand [1991] 55 Taxman 414 and the judgments of the Allahabad and Delhi Benches of this Tribunal.
4. We have considered the respective arguments.
5. As regards the revenue's contention that an assessee who hires out plant and machinery to others and does not itself use the same for the purposes specified in Section 32A is not entitled to investment allowance, this controversy has been dealt with by this Tribunal in the case of First Leasing Co. of India Ltd. v. ITO [1983] 3 ITD 808 (Mad.) in which it was held that it was not necessary that the assessee who used the plant and machinery itself and it was sufficient if it was being used by the person to whom it had been hired out for the purposes specified. This view has been followed by the various Benches of this Tribunal and the learned departmental representative has not pointed out any authority to the contrary. We, therefore, hold that this cannot be a ground for rejecting the assessee's claim.
6. Under Section 32A, investment allowance is admissible only on machinery which is installed in a small scaie industrial undertaking for the purpose of business of manufacture or production of any article or thing or in any other industrial undertaking for the purpose of business of construction, manufacture or production of any article or thing. It is admitted in the case before us that the kolhus and pans have been hired out by the assessee to farmers who installed them in their villages for the respective season for processing their own sugarcane crop and thereby producing goods. Thus, the entire activity so undertaken by a farmer to whom the assessee lets out the kolhus and pans is an agricultural activity. This activity can neither be described as an industrial undertaking nor can it be described as a business of manufacture or production of any article and thing. The income earned by a farmer by converting sugarcane into 'gur' would be agricultural income and not income from any business. So far as the assessee's activity in hiring out the said thing is concerned, it is pure and simple a trading activity and there is no element of an industrial undertaking. The purpose of granting investment allowance on new plant and machinery installed is to provide incentive for industrial development of the country and not for providing incentives to agriculturists and traders. It is in this light that we have to look to the provisions of Section 32A.
7. The judgment of the Hon'blc High Court in Jetha Nand's case (supra) is not relevant to the point. That was a case in which exemption under Section 5(1)(xxxi) of the Wealth-tax Act was claimed in respect of an oil mill owned by the assessee that was let out on rent. The Hon'blc High Court held that the assessee was entitled to exemption under the aforesaid section under which an assessee is entitled to certain exemption in respect of the assets forming part of an industrial undertaking belonging to the assessee. The oil mill was patently an industrial undertaking and was admittedly owned by the assessee and, therefore, the High Court held that although the oil mill was let out to some-one else the assessee was entitled to exemption. This judgment, therefore, is in relation to a different provisions of law in which different, considerations were involved and does not help the assessee. The judgment of the Allahabad Bench of the Tribunal in Bhim Sem Shyam Lal & Co. v. ITO [IT Appeal Nos. 1218 to 1220 (Delhi) of 1982, dated 3-11-1983] merely dealt with the question whether a person who hires out kolhu and pan is entitled to investment allowance. The Bench following the case of First Leasing Co. of India Ltd. (supra) accepted the assessee's claim without going into the question whether the other condition prescribed in Section 32A regarding the user of the plant and machinery were satisfied. Similarly, the judgment of the Delhi Bench in Babu Ram Prakash Narain v. ITO [IT Appeal No. 3509 (Delhi) of 1977-78, dated 18-4-1979], that was in relation to the assessee's claim of additional depreciation under Section 32(1)(iv) does not deal with the user aspect of the plant and machinery and follows the Allahabad High Court judgment in Ajodhya Prasad Tara Chand Khekra v. CIT [ 1967] 66 ITR 576 in which a person who hired out kolhus was held entitled to development rebate on the kolhus intended for hire. In this judgment also, only the hiring aspect of the matter was contested before the Hon'ble High Court and this judgment does not deal with the ultimate user of the plant and machinery for the purposes specified. Therefore, these orders can help the assessee only on one the part of the controversy which we have already decided in favour of the assessee by following the judgment of the Tribunal in the case of First Leasing Co. of India Ltd. (supra). We are, however, of the opinion that the ultimate user of the kolhus and pans by the farmers cannot be described as their user in an industrial undertaking for the purposes of business. We, therefore, hold that the assessee was not entitled to investment allowance in respect of kolhus and pans which the assessee hired out to farmers and by which the farmers only carried out agricultural operation of extracting juice from sugarcane and boiling such juice for its conversion into guran agricultural produce. We, therefore, set aside the order under appeal and restore the Assessing Officer's order. The appeal is allowed.