Income-tax---

----Investment allowance---Machinery installed for "manufacture or production" ---Computer is not an office appliance---Entitled to investment allowance---Indian Income Tax Act, 1961, S.32-A(2)(b)(iii).

The computer is not an office appliance and is entitled to investment allowance under section 32-A(2)(b)(iii) of the Income Tax Act, 1961..

CIT v. Shaw Wallace & Co. Ltd. (1993) 201 ITR 17 (Cal.) fol.

CIT v. Peerless Consultancy Services (Pvt.) Ltd. (1990) 186 ITR. 609 (Cal.) ref.

D.D. Vyas for the Commissioner.

P.M. Choudhary for the Assessee.

JUDGMENT

A.R. TIWARI, J.---At the instance of the Department (Commissioner of Income-tax, Bhopal), the Tribunal has stated the case and referred the undernoted question labelling it as one of law under section 256(1) of the Income Tax Act, 1961 (for short "the Act"), arising out of the order, dated July 13, 1992, passed in I.T.A. No.383/Ind.. of 1987 for the assessment year 1982-83 for our consideration and opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not treating the computer as office appliance and allowing investment allowance thereon?"

Briefly stated, the facts of the case are that the assessee is a limited company. The year of assessment is 1982-83, the previous year ending on March 31, 1982. The Assessing Officer treated the computer as an office appliance and did not allow investment allowance. On appeal, the Commissioner of Income-tax (Appeals), placing reliance on the earlier orders of the Tribunal, held that the computer was not an office appliance and the assessee was, therefore, entitled to investment allowance when the assessee undoubtedly is engaged in the activities of manufacture. Reliance was placed on Softek (P.) Ltd. v. ITO (1990) 32 ITD 540 (Delhi). The Department then filed the aforesaid appeal before the Tribunal, which was dismissed on July 13, 1992. Aggrieved, the Department filed the application under section 256(1) of the Act. The Tribunal on this application stated the case and referred the aforesaid question of law for our consideration and opinion.

We have heard Shri D.D. Vyas, learned counsel for the applicant/Department, and Shri P.M. Choudhary, learned counsel for the non-applicant/assessee.

The question referred in this case is concluded by the decision rendered in CIT v. Shaw Wallace & Co. Ltd. (1993).201 ITR 17 (Cal). In the aforesaid case, the undernoted question was referred (at page 19):

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the business carried on by the assessee in its computer division with the aid of computer system is an industrial undertaking which satisfies the conditions contained in section 32-A(2)(b)(iii) of the Income Tax Act, 1961?"

The Court answered as under (page 24):

"Investment allowance is admissible in respect of machinery or plant installed in any industrial undertaking for the purpose of business of construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule. There is no dispute that 'data processing' or 'computer' is not mentioned in the Eleventh Schedule. If, as held by the Division Bench in Peerless Consultancy Services (Pvt.) Ltd. (1990) 186 ITR 609 (Cal.), the assessee-company is an industrial company, there is no reason why such a company will not be entitled to the benefit of the investment allowance. Investment allowance will not be admissible in respect of office appliances. In our view, having regard to the nature and function of the computer and the data processing system, it cannot be said that they are office appliances.

An industrial company is a company engaged in the manufacture or processing of goods. 'Data-processing' means the converting of raw data to machine readable form and its subsequent processing (as storing, updating, combining, rearranging or printing out) by a computer. 'Computer' means 'one that computes; specifically a programmable electronic device that can store, retrieve, and process date'. There cannot be any doubt that raw data cannot be equated with the result derived. It is different in form and substance.

We are, therefore, of the view that the computer division is an industrial undertaking which satisfied the conditions mentioned in section 32-A(2)(b)(iii) of the Income Tax Act, 1961. "

In view of the aforesaid decision resting on identical facts and situation, we conclude that the Tribunal was justified in not treating the computer as an office appliance and in allowing the investment allowance thereon. The order is on firm foundation.

In the result, we answer the aforesaid question in the affirmative, i.e., in favour of the non-applicant/assessee and against the applicant/Department but without any orders as to costs.

Counsel fee for each side is, however, fixed at Rs.750, if certified

Transmit a copy of this order to the Tribunal.

M.B.A./3041/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.