- (1.) THE assessec, Partap Steel Rolling Mills (Asr.) (P.) Ltd. , Amritsar, is engaged in the business of manufacture and sale of steel. During the accounting period ending on September 30, 1976, investment allowance of Rs. 10,98,089 was claimed under Section 32a of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), in respect of a new oxygen plant installed for its gas division. This claim was disallowed by the Inspecting Assistant Commissioner on the ground that oxygen was a sale-able commodity in itself separate from iron and steel and that the new machinery purchased produced oxygen and not iron and steel although the production of oxygen had been undertaken primarily for the manufacture of iron and steel.
(2.) THE Commissioner of Income-tax (Appeals), however, returned the finding that the oxygen unit had been set up as a captive unit for the supply of oxygen to the assessee's iron and steel plant and that since its inception, 80 to 90 per cent. of the oxygen was being supplied to the steel plant and, in fact, the very reason for putting up the oxygen unit was that it was an essential article for the production of iron and steel and that, therefore, even if oxygen was an article by itself independent from iron and steel and was otherwise a saleable commodity, the setting up of this unit was an integral part of the assessee's iron and steel manufacturing plant and it must, consequently, be considered to have been installed for the purpose of manufacture or production of one or more of the articles or things specified in the Ninth Schedule. The investment allowance, as claimed, was consequently allowed. This was later upheld on appeal by the Tribunal.
(3.) AT the instance of the Revenue, the following question of law has, in this context, been referred for the opinion of this court: "whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in confirming the order of the Commissioner of Income-tax (Appeals) allowing deduction of investment allowance of Rs. 10,98,089 under Section 32a of the Income-tax Act, 1961, in respect of new machinery installed by the assessee in the gas division ?";