Law:

Section:

â- Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1981-82 - Whether activity of construction of dam does not amount to manufacture or production of an article and, therefore, assessee-firm engaged in said activity, would not be entitled for investment allowance under section 32A - Held, yes â-¡Section 36(1)(iii) of the Income-tax Act, 1961, read with rule 3 of the Companies (Acceptance of Deposit) Amendment Rules, 1981 - Interest on borrowed capital - Assessment year 1981-82 - ITO disallowed payment of interest made by assessee-company to depositors in excess of 15 per cent per year under Companies Deposit Rules, which was upheld by Commissioner (Appeals) - Tribunal held that part of interest which had been disallowed by ITO in view of ceiling put under Companies Deposit Rules was to be allowed as said rules was not applicable in respect of accounting period in question - Whether since provisions of rule 3 of Companies (Acceptance of Deposit) Amendment Rules, 1981 came into operation only on 1-4-1981whereas accounting period of assessee ended on 30-9-1980, same would not be applicable in year in question - Held, yes - Whether, therefore, Tribunal was justified in allowing amount of interest claimed by assessee - Held, yes CASE REFERRED TO CIT v. N.C. Buddharaja & Co. [1993] 204 ITR 412/ 70 Taxman 312 (SC) [Para 4]. A.N. Mahajan for the Applicant. ORDER 1. The Income-tax Appellate Tribunal, Allahabad has referred the following five questions of law. The first three at the instance of Commissioner of Income-tax and remaining two at the instance of assessee under section 256(1) of the Income-tax Act (hereinafter referred to as 'the Act') for opinion to this Court :- "1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in upholding the order of CIT(A) directing the ITO to allow investment allowance under section 32A? 2. Whether on the facts and in the circumstances of the case, the machinery employed by the assessee entitles the assessee to investment allowance within the meaning of section 32A(2)(b) of the Income-tax Act, 1961? 3. Whether, on the facts and in the circumstances…

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