The purpose of boring and drawing water from underground is crucial in determining the admissibility of investment allowance under Section 32a of the Income-tax Act.

Y. R. MEENA, BIJITENDRA MOHAN MITRA

( 1 ) BY this application under Section 256 (1) of the Income-tax Act, 1961, the following question has been referred for our opinion :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that investment allowance under Section 32a of the Income-tax Act, 1961, was admissible on the machinery used by the assessee for boring operations for extracting water from underground ?"

( 2 ) AT the outset, it is brought to our notice that an identical question was referred to this court and upon consideration of the same by this court the matter was sent back to the Tribunal. As the full facts relevant to question are not available to decide or to answer the question referred, the matter can be sent back to the Tribunal on the same lines as has been sent in the earlier years on identical facts. While sending the matter back, this court has in the case of CIT v. Western Bengal Coal Fields Ltd. [1994] 208 ITR 981 observed as under (page 985) :"in this case, it is not known for what purpose the assessee was commissioned to operate and extract water. Our knowledge is limited to extraction of water and goes no further. A question mark, therefore, hangs--whether the assessee bored wells to win water or bored the wells to bale out water from inside the mines. If the purpose is purely subterranean, then we cannot say that the assessee is producing any article or thing. Mere physical emergence of water does not necessarily constitute in the commercial sense production of an article or thing. Any mechanical operation may, for a purpose, incidentally produce things but of no surface use. In such a situation, it cannot be said that such non-commercial thing would also be a thing for the purpose of Section 32a because the word 'thing' in its setting necessarily refers to a commercial thing. In point of fact, the sub-soil water drawn to surface ground, far from having a commercial potential, may be unwholesome and injurious to the surface environment. The Tribunal has not looked into the purpose of extracting water. In case the purpose of drilling was to win water the ratio decidendi in Super Drillers' case shall apply. As the full facts of the case are not available, we decline to answer the question and remit the matter to the Tribunal with the direction to ascertain the purpose of boring and drawing water from underground. The Tribunal shall allow the parties to lead evidence if they so desire. There will be no order as to costs. "

( 3 ) LEARNED counsel for the Revenue has not controverted these facts. Accordingly, we send the matter back to the Tribunal with a direction to ascertain the purpose of boring and drawing water from underground and also to allow the parties to lead evidence in deciding the question afresh. The reference matter accordingly stands disposed ofaccordingly stands disposed of.

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