Commissioner Of Income Tax v. Shaan Finance (P) Ltd.[[1

THE HON'BLE SRI JUSTICE V.V.S.RAOANDTHE HON'BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.260 of 1996 ORDER: (Per Hon’ble Sri Justice V.V.S. Rao) The Commissioner of Income Tax(Central), Karnataka, Bangaloregot the following question referred to this Court under Section 256(1) ofthe Income Tax Act, 1961 (the Act, for brevity). “Whether on the facts and circumstances of the case, the AppellateTribunal was right in law in holding that assessee is entitled toinvestment allowance on machineries leased out to others in thecourse of the business of leasing ?” The bare facts as mentioned in the statement of the case may benoticed. The assessee is a finance company. As part of their business,they hired out machinery to the manufacturers under hire agreement. For the assessment years 1987-88, 1988-89 and 1989-90, they filed theirreturns of income claiming investment allowance under Section 32-A(1)of the Act. The assessing officer disallowed the same on the ground thatthe conditions laid down under Section 32(1) and Section 32A(2)(b)(iii) ofthe Act are not satisfied. The Commissioner of Income Tax (Appeals)confirmed the assessment order. On further appeal, the AppellateTribunal allowed the appeals and directed the Assessing Officer to allowinvestment allowance to the assessee. Being aggrieved, the Revenuesought reference of the above question. During the course of arguments, learned counsel for the IncomeTax brought to our notice the decision of the Supreme Court in Commissioner of Income Tax vs. Shaan Finance (P) Ltd.[[1]] In Shaan Finance, the Supreme Court considered the followingquestion. “Whether on the facts and in the circumstances of thecase, the Tribunal was right in holding that in respect of themachinery owned by the assessee, but leased to third partiesand used by them for the manufacture of article or thing,investment allowance was allowable under Section 32-A ?” The above question was answered in favour of the assesseeobserving that when assessee is engaged in the business of hiring outthe machinery, the three conditions required under Section 32-A of the Act for claiming investment allowance are fulfilled and therefore the investment allowance cannot be denied to the assessee. Following the decision of the Supreme Court, this reference isanswered in the affirmative against the Revenue and in favour of theassessee. The Reference Case stands disposed of accordingly without anyorder as to costs. ________________ (V.V.S. RAO,J) ____________________ (B.N.RAO NALLA,J) 12[th ]December, 2011pnb [1][1998] 231 ITR 308