Law:

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Section 32A, read with section 32, of the Income-tax Act, 1961 - Investment allowance - Assessment year 1984-85 - Whether where assessee an engineering company had installed in its factory premises a computer system which was used for processing raw materials, data, wages and salary payment and for monitoring details of production, assessee was entitled to investment allowance and additional depreciation on such computer system - Held, yes FACTS The assessee, an engineering company, manufacturing various materials handling equipments. It had installed and commissioned a computer system in its factory premises during the previous year relevant to the assessment year 1984-85. It claimed depreciation at special rate, and also investment allowance on such computer system on the ground that the computer system was part of the plant. The Tribunal held that since the computers were not producing any material or thing which was meant for business activities of the assessee, rather, the computer system was utilized, inter alia, for accounting purposes, the assessee was not entitled to investment allowance or additional depreciation. On reference : HELD Sometimes a machinery or plant installed and used mainly for the purposes of business of construction, manufacture or production of any article or thing, not specified in the list, may have been partly used for the purposes of business of manufacture or production of any article or thing specified in the said list. An investment allowance is not intended to be denied in such cases.[Para 13] It was the specific case of the assessee that the computers were installed in the factory premises for the purposes of business of manufacture and production of article, which fact had not been denied by the revenue. It had not been disputed that the computers installed by the assessee were used for processing raw materials, data, wages and salary payment and for monitoring the details of production. It could, therefore, be safely said that the assessee was entitled to investment allowance and depreciation thereon. [Para 14] CASES REFERRED TO CIT v. I.B.M. World Trade Corpn. [1981] 130 ITR 739 (Bom.) [Para 2], CIT v. International…

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