SATISH CHANDRA, A.M. : -
(1.) THE assessees appeals and the cross-appeals filed by the Revenue arise out of the separate orders dt. 7th Dec., 1989 passed by the learned CIT(A), Bhopal, for the asst. yrs. 1986-87, 1987-88 and 1988-89, respectively. For the sake of convenience, all these appeals are disposed of by this common order.
(2.) ITA No. 198/Ind/90 - Ground No. 1 in this appeal for the asst. yr. 1986-87 relates to denial of claim of investment allowance on cost of filter plant of Rs. 8,74,060. The brief facts as culled from the assessment order are that the assessee-company was incorporated under the Companies Act, 1956 on 12th Oct., 1984. The assessee-company took over the assets and liabilities of a firm styled as Reliable Cigarette Industries w.e.f. 1st Nov., 1984. The partners of the firm are the Managing Director and Directors of the company. The assessee-company manufactures cigarettes for ITC, Calcutta, and the company receives only conversion charges "job work". All the raw materials including processed tobacco are supplied to the company by M/s. ITC Ltd. The entire process of the conversion is being done as per the specification given by the ITC Ltd. The assessee is entitled to only conversion charges including the slides charges. For the asst. yr. 1986-87 (relevant accounting period ended on 31st Dec., 1985) the assessee filed return showing loss of Rs. 56,904 on 31st March, 1987. A revised return was subsequently filed on 29th Nov., 1988 declaring loss of Rs. 7,05,905. The reason for the revised return was stated to be that in the original return the assessee did not claim investment allowance under S. 32A. In the revised return the assessee claimed investment allowance. The claim of investment allowance of the assessee on filter attachment machine valued at Rs. 8,74,060 has been negatived by the Assessing Officer with the following observations : "Even the investment allowance claimed on filter attachment machine valued at Rs. 8,71,060 which was installed in the month of May, 1985 is also not allowable as the same should have been first put to use in the immediately succeeding previous year from the year of acquisition of the machinery, i.e. asst. yr. 1985-86 as the said machinery was purchased on 15th May, 1983 and first put to use in the month of May, 1985." When the matter came up for consideration before the CIT(A), he concurred with the views of the Assessing Officer and held thus - "The evidence before me shows that the machinery was purchased in May, 1983. As per the provisions of the Act, investment allowance is admissible in the previous year in which the machinery or plant was acquired or in the immediately succeeding pervious year if put to use. The machinery was acquired in 1983. The investment allowance could be claimed at the most in the immediately succeeding previous year. In, my view, the claim is not admissible to the appellant as the machinery was put to use in May, 1985. The rejection of the claim of this ground itself is upheld."
Being aggrieved with the above decision of the CIT(A), the assessee is in appeal before the Tribunal.
(3.) THE learned counsel for the assessee submitted that M/s. Reliable Cigarette Industries, Mandideep, a partnership firm, started the cigarette factory w.e.f. 1st May, 1984. It manufactured only non-filtered cigarettes. Its business continued upto 31st Oct., 1984. THE assessee-company took over the assets and liabilities of the above firm w.e.f. 1st Nov., 1984 and the first year of the assessees business is asst. yr. 1986-87 of which the accounting period is from 1st Nov., 1984 to 31st Dec., 1985. He submitted that the filtration plant was a new machinery which was purchased by the erstwhile firm in May, 1983. No depreciation was claimed in respect of this machinery by the said firm as the machinery was not used for the purposes of business. It was first put to use in the month of May, 1985, i.e. during the accounting period relevant to the asst. yr. 1986-87. In the immediately preceding year the machinery was under installation. THE learned counsel invited our attention to certificate dt. 25th Jan., 1989 of Production Engineer, In-charge, a copy of which appears at page 17 of the compilation. He has certified that the cigarette filter assembling machine (Haum Max III) was put to use first time in the month of May, 1985. This fact is duly supported by the summary of RG-1 register, a copy of which appears at pages 18-19 of the compilation. Referring to the provisions contained in S. 32A(1) of the Act, the learned counsel for the assessee submitted that the investment allowance is admissible in the previous year in which the machinery or plant was installed or in the immediately succeeding previous year if the machinery or plant is first put to use. On the basis of the evidence on record to the effect that the filtration unit started production of filter cigarettes w.e.f. May, 1985 which falls in the previous year relevant to the asst. yr. 1986-87, he argued that the claim of the assessee for investment allowance is admissible in the asst. yr. 1986-87 under the law.;