SEN,J. - (1.) THE Tribunal has referred to this Court, the following questions of law, under s. 256(1) of the IT Act, 1961 ('the Act') : Question of the instance of the Revenue : "1. Whether, on the facts and in the circumstances of the case, the Tribunal justified in law in holding that the legal expenses incurred for challenging the jurisdiction assumed by the AO under s. 147(b) of the IT Act are not hit by s. 80VV of the IT Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case and on a correct interpretation of provision of s. 32A(1) of the IT Act, 1961, the Tribunal was justified in holding that the internal telephone system was 'plant' and not office appliances and in the view the assessee was entitled to investment allowance under s. 32A of the IT Act on the installation of internal telephone system ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the ITO to allow one-fifth deduction of 100 per cent (instead of 80 per cent) of the initial contribution made by the assessee to superannuation fund ?" Questions at the instance of the assessee : "1. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have allowed depreciation on the assets representing the capital expenditure on scientific research fully allowed as deduction in computing the total income for the earlier assessment year ? 2. Whether, on the facts and in the circumstances of the case and on a true construction of s. 45 of the IT Act, 1961, the tribunal erred in holding that the amount received from the insurance company in respect of a trawler 'Jaya Rani' which sank in deep waters is taxable as the same arises on a transfer and the excess over cost is, therefore, taxable under the head 'Capital gains'? 3. Whether, on the facts and in the circumstances of the case and on a true construction of s. 45 of the IT Act, the amount of insurance money received from the insurance company in respect of a trawler which sank in deep waters, is received on a transfer of assets with in the meaning of the expression as contemplated under s. 45 of the Act ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid under s. 220(2) of the Act amounting to Rs. 1,42,993 was not deductible in computing the business income of the assessee ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee's claim for deduction of interest paid under s. 220(2) OF THE Act cannot be allowed even under s. 80V of the Act?"
(2.) THE assessment year involved is 1978-79 for which the accounting year ended on 25th Dec., 1977. The question No. 1 raised at the instance of Revenue is concluded by a judgment of this Court in the case of CIT vs. Sri Krishan Sugar Mills (IT Ref. No. 102 of 1983, dt. 17th July, 1989). Following the said judgment, question No. 1 at the instance of the Revenue is answered in the affirmative and in favour of the assessee.
(3.) THE second question raised by the Revenue is about the internal telephone system installed by the assessee-company. The case of the Revenue is that the internal telephone system installed in the assessee's pesticides complex No. 1 at Bhopal cannot be treated as the office appliances and the assessee could not claim investment allowance under s. 32A of the Act, for installation of such internal telephone system. Sec. 32A provides as follows : "32A. Investment allowance.--(1) In respect of a ship or an aircraft or machinery or plant specified in sub-s. (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of the previous year, of a sum by way of investment allowance equal to 25 per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : Provided that no deduction shall be allowed under this section in respect of-- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house; (b) any office appliances or road transport vehicle; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under s. 33; and (b) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profit and gains of business or profession' of any previous year. (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :-- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft; (b) any new machinery or plant installed after the 31st day of March, 1976,-- (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) for the purposes of business of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule; or (iii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things." It has been contended on behalf of the Revenue that office appliances have been specifically excluded from the ambit of s. 32A by the proviso. No investment allowance can be given in respect of any office appliance on the ground that it came within the expression 'plant'. However wide the amplitude of the word 'plant' may be, when specific exclusion of office appliance has been made in the proviso, then no investment allowance can be given.;