Law: Income Tax Act, 1961

Section: 32,32A

(a) Income-tax----Investment allowance ---Assessee carrying on business in drilling bore wells, using rigs and compressors---Is entitled to investment allowance--¬Indian Income Tax Act, 1961, S.32-A. (b) Income-tax--- ----Depreciation---Assessee carrying on business in dsi4ling bore wells using rigs and compressors---Is entitled to depreciation at 30 per cent. on equipment used---Indian Income Tax Act, 1961, S.32. The assessee was a partnership-firm carrying on the business of drilling bore wells using rigs and compressors. The assessee was allowed depreciation on machinery at 30 per cent. and also granted investment allowance under section 32-A of the Income Tax Act, 1961. The Commissioner of Income-tax held that the depreciation on machinery should have been allowed at 15 per cent. only and no investment allowance should have been allowed on the machinery under section 32-A and accordingly by his order under section 263 set aside the assessment. The Tribunal allowed the appeal of the assessee and held that depreciation at 30 per cent. was allowable on rigs and compressors and that the assessee was also entitled to investment allowance in respect of the machinery purchased by it for the drilling operations. On a reference: Held, (i) that the assessee was entitled to depreciation at the rate of 30 per cent. in respect of the equipment in question; CIT v. Super Drillers (1988) 174 ITR 640 (AP) fol. (ii) that the assessee was entitled to investment allowance in respect of the equipment in question. CIT v. Super Drillers (1988) 174 ITR 640 (AP) fol. JUDGMENT N.K. JAIN, J.---The Income-tax Appellate Tribunal, Indore Bench, Indore, has on an application under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"), made by the applicant-Department, referred to this Court the following questions, said to be of law, arising out of its order, dated May 9, 1991, passed in I.T.A. No.407/(Ind) of 1989: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Commissioner of Income-tax was not justified in invoking the provisions of section 263? (ii) Whether, on the facts and in the circumstances of the…

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