SENGUPTA,J. - (1.) IN this reference under s. 256(1) of the IT Act, 1961 ('the Act'), the following questions of law have been referred to this Court for the asst. yr. 1981-82 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing investment allowance under s. 32A(2)(b)(iii) of the IT Act, 1961, in respect of machinery let out on rent and used in excavation of coal by the assessee? 2. Whether on the facts and in the circumstances of the case, and in view of Explanation 2 of s. 139(8) of the Act, the Tribunal was justified in observing that Explanation 2 could not be invoked when no tax was payable by a registered firm on the basis of its completed assessment ?"
(2.) THE facts leading to this reference are that the assessee is a partnership firm assessed in the status or registered firm under the provision of the Act. The business of the assessee, inter alia, was raising of coal in Bardjna Colliery and Marulidih Colliery belonging to Eastern Coal-fields Ltd. At the said collieries open cast mining of coal was undertaken. The assessee, employed new machinery like Bulldozers, Compressors, Drills, Dumpers, Scrappers, Shovels and other heavy earthmoving machinery for the said mining job. The agent of the said collieries also gave a certificate to the effect that the assessee was engaged in the mining job. The work of the assessee consisted, inter alia, of cutting earth, drilling and blasting stones, removing the overheads, removing the coal and transporting such coal and dumping it at the coal yard. The entire work was undertaken by the assessee itself with its own machinery and workmen. The assessee was paid for the various jobs at the rates stipulated in the contract. All the machinery for the job was operated by the assessee. None of the said machinery was made over by the assessee to the collieries. The assessee employed own staff and labourers for working the said machinery and raising the coal. The assessee claimed before the ITO that new machinery was purchased and used for the said mining job and it was entitled to investment allowance under s. 32A of the Act. The ITO disallowed the said claim on the ground that the assessee was not an industrial undertaking since it was merely letting the machinery on hire and it was immaterial how such machinery was used. The certificate of the agent of the colliery was ignored by the ITO on the ground that it was of a general nature. The ITO further held that: "... the mere fact of being engaged in removing over burden and extraction of coal for others would not make the assessee-firm an industrial undertakings." By the said order or assessment, the assessee was granted refund of the excess tax paid by it over the assessed tax. However, since the return was filed late, the ITO levied interest under s. 139(8) of the Act by calculating the tax payable on the basis that the assessee was an unregistered firm by invoking Explanation 2 to s. 139. Against the said order of the ITO, an appeal was preferred by the assessee. In such appeal, the CIT (A) held that the assessee was entitled to the investment allowance on the machinery as claimed. He held: "It is not that the assessee was carrying on the business or hire and purchase in respect of the machinery. It was not even leasing of the machinery on hire... It is not that the heavy earthmoving machinery were let on hire to the coal mines to be handled by them. The machinery was operated by the employees of the assessee's firm itself... Since the work performed by the assessee was removal of over-burden for the extraction of coal-it squarely came within the purview of s. 32A(2) (iii) for production of an article not specified in the list in the 11th Schedule."
(3.) THE ITO was directed to allow investment allowance.;