THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.260 of 1996 ORDER: (Per Hon’ble Sri Justice V.V.S. Rao) The Commissioner of Income Tax(Central), Karnataka, Bangalore got the following question referred to this Court under Section 256(1) of the Income Tax Act, 1961 (the Act, for brevity). “Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that assessee is entitled to investment allowance on machineries leased out to others in the course of the business of leasing ?” The bare facts as mentioned in the statement of the case may be noticed. The assessee is a finance company. As part of their business, they hired out machinery to the manufacturers under hire agreement. For the assessment years 1987-88, 1988-89 and 1989-90, they filed their returns of income claiming investment allowance under Section 32-A(1) of the Act. The assessing officer disallowed the same on the ground that the conditions laid down under Section 32(1) and Section 32A(2)(b)(iii) of the Act are not satisfied. The Commissioner of Income Tax (Appeals) confirmed the assessment order. On further appeal, the Appellate Tribunal allowed the appeals and directed the Assessing Officer to allow investment allowance to the assessee. Being aggrieved, the Revenue sought reference of the above question. During the course of arguments, learned counsel for the Income Tax brought to our notice the decision of the Supreme Court in Commissioner of Income Tax vs. Shaan Finance (P) Ltd.[1] In Shaan Finance, the Supreme Court considered the following question. “Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that in respect of the machinery owned by the assessee, but leased to third parties and used by them for the manufacture of article or thing, investment allowance was allowable under Section 32-A ?” The above question was answered in favour of the assessee observing that when assessee is engaged in the business of hiring out the machinery, the three conditions required under Section 32- A of the Act for claiming investment allowance are fulfilled and therefore the investment allowance cannot be denied to the assessee. Following the decision of the Supreme Court, this reference is answered in the affirmative against the Revenue and in favour of the assessee. The Reference Case stands disposed of accordingly without any order as to costs. ________________ (V.V.S. RAO,J) ____________________ (B.N.RAO NALLA,J) 12th December, 2011 pnb [1] [1998] 231 ITR 308