SENGUPTA,J. - (1.) IN this reference under s. 256(1) of the IT Act, 1961 ('the Act') the Tribunal has referred the following question for opinion of this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to investment allowance under s. 32A of the IT Act, 1961 on the plant and machinery leased out to Grasim Industries Ltd.?" The facts as found by the Tribunal are as follows: The assessment years involved are 1986-87 and 1987-88.
(2.) DURING the years, the assessee has income from trading activities at Bombay in the name of Bharat Trading International and from the knitting unit in the name of Bharat Trading International at Birlanagar, Gwalior and income from licence fee and interest, etc. In the order of assessment for the asst. yr. 1986-87, the AO observed that the assessee received Rs. 84 lakhs as licence fee from Grasim Industries Ltd., Birlanagar, as per leave and licence agreement dt. 27th July, 1984 for the period from 1st April, 1985 to 31st Marrch, 1986 and also additional licence fee on addition of plant and machinery pursuant to supplementary agreement dt. 1st Jan., 1986. The total receipt was Rs. 84,78,300 on account of the licence fee for the asst. yr. 1986-87. The AO considered the claim of investment allowance for the addition of plant and machinery and worked out the investment allowance for the above assessment year at Rs. 32,53,797.
(3.) FOR the asst. yr. 1986-87, the AO applied the provisions of s. 80 VVA of the Act and allowed deduction only of Rs. 19,74,076 out of the said amount. In the following asst. yr. 1987-88 also, the AO applied the provisions of s. 80 VVA and adjusted the balance of Rs. 12,79,721 including the investment allowance for the current year at Rs. 25,81,132.;