R. Gururajan, J.
1. M/s. McDowell & Co., is before us raising the following questions of law in the light of the order of the Tribunal passed in ITA No. 1947/1992 dated 17.5.1999:
1. Whether on the facts, the Tribunal was right in denying investment allowance on effluent treatment plant holding that the said plant and machinery was an integral part of the plant and machinery for the production of liquor which item would fall under 11th Schedule of the Income-tax Act, 1961?
2. Whether on the facts when the effluent treatment plant is exclusively used for the process of effluent and no part of the plant and machinery was used for manufacture of liquor, the bar, under 11th Schedule to allow investment allowance would operate against grant of investment allowance for the said plant and machinery?
2. Facts in brief are as under:
The appellant-Company claimed investment allowance on the effluent treatment plant installed in its IMFL Unit amounting to Rs. 26,35,439/-. The same was disallowed by the assessing authority. An appeal was filed before the appellate Commissioner. The Appellate Commissioner dismissed the appeal. A second appeal was filed. Second appeal stood dismissed. It is in these circumstances, the assessee is before us.
3. Sri. Arvind Datar, learned Senior Counsel invites our attention to the material facts to say that the authorities are wrong in denying concessional benefits to the assessee on the fact of this case and in the given circumstances. He invites our attention to Section 32A and also Section 32A(2C) of the Act to say that rejection in the light of these two statutory provision requires our interference. He explains to us the facts of this case for the purpose of exemption in the case on hand. learned Counsel also invites our attention to 11th Schedule to say that Section 32A(2C) would provide a benefit even after 1987 on the facts of this case.
4. Per contra, Dr. Krishna, learned Senior Counsel appearing for the Revenue would support the order. He says that a careful reading of Section 32A would indicate the intention of the Legislature of no benefit to the appellant in the given circumstances. He says that effluent plant cannot be treated independently for the purpose of concession on the facts of this case. He wants the appeal to be dismissed.
5. After hearing, we have carefully perused the, orders passed by the authority. The assessing authority has chosen to reject the request relating to the investment allowance on effluent treatment plant installed in distilleries in the light of Schedule 11 of the Income Tax Act. When the same was challenged, the appellate authority also accepted the order of the assessment authority. The appellate Commissioner would hold that the effluent treatment plant is an integral part of the machinery used for manufacture of alcoholic liquor and that therefore the appellant is not entitled to have any benefits on the facts of this case. The Tribunal has endorsed the views of the appellate Commissioner. In the light of the arguments placed before us, we have carefully perused the orders passed by the authorities.
6. Section 32A would provide for investment allowance.
Section 32A(1) would provide for deduction of a sum by way of investment allowance equal to 25% of the actual cost of the ship, aircraft or machinery or plant to the assessee.
Section 32A(2)(b)(iii), if read carefully would show that the ship or aircraft or machinery or plant referred to in Sub- section 1 shall be the following namely, a new ship or new aircraft acquired after 31.3.1976 by an assessee engaged in the business of operation of ships or aircraft. For the purpose of business of generation or distribution of electricity or any other form of power or in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing.
Section 32A(2)(b)(iii) would provide a benefit to any other industrial undertaking under 32A(i) provided manufacture or production of any article or thing, not being an article or thing specified in the list in the 11th Schedule.
11th Schedule would indicate various articles or things for the purpose of Section 32A of the Act. Item No. 1 in 11th Schedule would show beer, wine and other alcoholic spirits.
7. Therefore, the authorities have chosen to deny the concessional benefits in the light of the list of articles namely, beer, wine, or alcoholic spirits being manufactured by the appellants. Let us see as to whether Section 32A(2)(b)(iii) would come in the way of benefit to the assessee. At this stage, we must also notice the subsequent development in terms of the Finance Act of 1983. Section 32A(2C) was introduced in 1981. The said Section would read as under:
Where any new machinery or plant, being machinery or plant which would assist in control of pollution or protection of environment and which has been notified in this behalf by the Central Government in the Official Gazette, is installed after the 31st day of May, 1983 but before 1st day of April, 1987 in any industrial undertaking referred to in Sub-clause (i) or Sub-clause (ii) or Sub-clause (iii) of Clause (b) of Sub-section (2) the provisions of Sub-section (1) or plant as if for the words 'twenty-five per cent', the words 'thirty-five per cent' had been substituted.
8. There is subsequent development in terms of a benefit under Section 32A(2C) of the Act. A reading of the said provision would show that the Legislature in its wisdom has chosen to provide a concessional benefit of investment allowance probably to encourage maintenance of pollution plant in the larger interest of the society as a whole. That is why, it is mentioned that the words 'twenty-five percent' is enhanced to 'thirty-five per cent' in terms of the said Section. It also refers to Section 32A(2)(b)(iii) which would indicate that despite restriction in terms of 11th Schedule, the benefit is extended for the purpose of protection of environment in terms of the Statute. However, we must notice that if the pollution plant is installed after 31.5.1983 but before 1.4.1987 it would qualify for 35% otherwise 25%. A reasonable reading of Section 32A(2C) would provide for a beneficial allowance of 25% for pollution plant. Unfortunately, this beneficial piece of concession has not been properly appreciated by the authority. If only the authorities have taken note of this subsequent beneficial provision, they would not have denied the same to the appellant. In these circumstances, we are of the view that in the light of the beneficial intention behind Section 32A(2C), the appellant is entitled for a benefit of not 35% and only 25% because, the plant was installed after 1.4.1987. At this stage, we must also notice the finding of the Tribunal in the matter of rejection of the concession on the ground of pollution control equipment being an integral part of the undertaking, in the case on hand. That finding to our mind is unsustainable in the light of a laudable object of protecting the environment by way of concessional allowance of 25% in terms of legislative wisdom. Therefore, we have no hesitation in accepting the argument of Sri. Arvind Datar, learned Senior Counsel in the case on hand.
9. We must notice one more aspect of the matter for the purpose of consideration of the case of the appellant in the given circumstances. In fact, Dr. Krishna, learned Counsel would argue that in the event of granting any concession, it may relate back to 1976. This submission is unacceptable to us because the benefit in terms of Section 32A(2C) is available only in the event of installation of pollution plant after 31.5.1983. Dr. Krishna, learned Counsel also says that if the argument is accepted, then it may amount to providing investment allowance even after 1.4.1987. Our answer would be certainly 'yes', in the light of providing benefit/concession in the light of laudable object of protecting the environment. If the intention of the legislature is not to grant after 1987 this benefit, they would have either deleted Section (2C) or they would have amended the said Section. So long Section 32A(2C) is available on record, the benefit cannot be denied by the department. Any denial of benefit would be going against the protection of environment in terms of the intention of the legislature as we gather from the very Section itself. Hence, we deem it proper to answer the questions of law with regard to entitlement in favour of the assessee. However, we must notice one more aspect of the matter as argued by the learned Counsel for the Department. The Tribunal has not chosen to consider Section 32A(2C) in the case on hand. As mentioned earlier, a reading of the said provision would show that the benefit is available only in respect of the machinery or plant which has been notified in this behalf by the Central Government in the Official Gazette.
10. At the time of arguments, Sri. Datar, learned Counsel places before us a notification dated 1.9.1984. It is not clear from the material on record as to whether the pollution plant installed by the appellant would fall in the notification in terns of Section 32A(2C) of the Act, Therefore, while answering entitlement in favour of the assessee, we deem it proper to remand the matter to the Tribunal only for the purpose of consideration as to whether the plant would fall in terms of the notification. Parties are to appear before the Tribunal without waiting for any notice, what so ever, on 25.10.2006. The Tribunal is to consider the material facts with regard to the pollution control equipment falling within the notification dated 1.8.1984. If the assessee is able to convince the Tribunal with regard to its plant being falling in the notification, then the Tribunal has to provide the benefits to the appellant in terms of this order.
11. In the result, this appeal is partly allowed. The questions of law are answered in favour of the assessee with a condition that the benefits are available only in the event of a finding by the Tribunal with regard to the equipment falling within the four corners of the notification dated 1.8.1984.
12. Ordered accordingly. No costs.