M.Y.EQBAL,J. - (1.) AT the instance of the Assessee, on an application filed under Section 256(2) of the Income Tax Act, 1961 the Income Tax Appellate Tribunal, Patna Bench, Patna, has referred the following question to this Court for decision relating to assessment year, 1984 -85: (i) Whether the Tribunal is correct in law in holding that on computer, investment allowance and additional depreciation are not allowed? (ii) Whether, on the facts and in the circumstances of the appellant's case, the Tribunal is justified in law in holding that the computer installed and used in the factory premises of the appellant is not entitled to investment allowance and additional depreciation.? (iii) Whether, on the facts and in the circumstances of the appellant's case, the Tribunal is justified in law in holding that the computer installed in the factory premises is not a part of the manufacturing machinery since it itself does not manufacture or produce any article or thing dealt by the Assessee?
(2.) THE Assessee is on Engineering Company manufacturing various materials handling equipments. The Assessee installed and commissioned computer system accessories during the previous year relating to assessment years 1984 -85. The Assessee claimed depreciation at the rate of 2% as per the provisions of Section 32 as well as investment allowances under Section 32A of the Income Tax Act. The Assessee claimed depreciation and investment allowances on the ground that the computer system is a plant installed in its factory premises. The claim of the Assessee was disallowed by the Assessing Officer holding that the computers were used by the Assessee for accounting purposes. The Assessing Officer further held that if the computers are treated as a plant, then the rate of depreciation can be that of applicable to plants and machineries and not special rate provided for computer. The Assessee then challenged the said assessment order by filing First Appeal before the Appellate Commissioner of Income Tax. The appellate Commissioner of Income Tax, relying upon the two decisions of the Bombay High Court reported in 130 ITR. 739 and 131 I.T.R., page 1, came to the conclusion that the computers were plants and all works were done on these computes with facilitated smooth running of the business. The appellate authority thus allowed the claim of the Assessee for investment allowance as well as additional depreciation. The revenue then approached the Tribunal by preferring Second Appeal. The Appellate Tribunal, considering the decisions rendered by the Calcutta High Court, took the view that since the computers were not producing any material or thing which is meant for business activities of the Assessee, rather, the computer system was utilized, inter alia, for accounting purposes, that is, for maintaining the stock of raw materials and the finished goods, the Assessee is not entitled to investment allowance under Section 33A or additional depreciation under Section 32(1)(2)(a) of the Income Tax Act. In the aforesaid circumstances, at the instance of the Assessee, the instant reference has been made for answering the questions quoted hereinabove. Before appreciating the submissions made by the learned Counsels appearing for the parties, I would first like to discuss the decisions given by the different High Courts.
(3.) IN the case of 'CIT v. Datacons (P) Ltd. : [1985]155ITR66(KAR) , the Karnataka High Court held that: Where a company is engaged in processing the date furnished by its customers by using IBM Unit Record Machine Computer, i.e. the vouchers and statements of accounts received from its customers, and converts them into balance -sheets, stock accounts, sales analysis, etc. which are printed as per the requirements of the customers, the assessee, in all these activities, has to play an active role by co -ordinating the activities and collating the information. Such activities amount to 'processing' of goods. The assessee in such circumstances was, therefore, held to be an industrial company which has been defined under Section 2(7)(c) of the Finance (No. 2) Act of 1977, to mean, a company which is mainly engaged in the business of generation and distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. In view of the above decision of the Karnataka High Court, the assessee -company can be said to be an industrial undertaking which is engaged in the manufacture or production of articles or things not specified in the Eleventh Schedule. ;