2004 (9) TMI 68 - HC - Income Tax

Investment allowance under section 32A - Whether Tribunal was correct in law in holding that the tractors/trollies were not road transport vehicles and were therefore entitled to investment allowance under section 32A of the Income-tax Act 1961? - we answer the question of law referred to us in the negative i.e. in favour of the Revenue and against the assessee.

Summary

Issues involved:
Interpretation of the term "road transport vehicles" for investment allowance under section 32A of the Income-tax Act, 1961.

Analysis:
The judgment delivered by the High Court of Allahabad pertained to the interpretation of the term "road transport vehicles" for claiming investment allowance under section 32A of the Income-tax Act, 1961. The Income-tax Appellate Tribunal referred the question of law to the court regarding the eligibility of tractors and trollies as road transport vehicles for investment allowance. The respondent-assessee, engaged in construction works, claimed investment allowance for tractors and trollies used in their projects. However, the Inspecting Assistant Commissioner rejected the claim, stating that tractors were considered road transport vehicles. The Commissioner of Income-tax (Appeals) also supported this view. The Tribunal, though, dismissed the Revenue's appeal.

The court considered the precedent set by the apex court in the case of CIT v. N.C. Budharaja and Co. The apex court had ruled that construction activities like building dams or canals do not qualify as manufacturing or producing articles, thus disallowing investment allowance under section 32A of the Act. Applying this principle, the court concluded that since investment allowance was not admissible for construction works like tunnels and minor irrigation projects, the question of allowing investment allowance for tractors and trollies did not arise. Therefore, the court answered the question in the negative, favoring the Revenue and rejecting the assessee's claim for investment allowance on tractors and trollies. The judgment was delivered by R.K. Agrawal J. and Prakash Krishna. No costs were awarded in this matter.