Building contractor not treated as industrial undertaking, so investment allowance and section 80J relief were denied.

A building contractor constructing dwelling units was held not to satisfy the statutory test of manufacture or production for treatment as an industrial undertaking. Investment allowance under section 32A(2)(b)(iii) was therefore denied because the construction activity did not fall within the requisite industrial process. Relief under section 80J also failed, as that benefit depended on the same industrial undertaking character and profits derived from it. The reference was accordingly answered against the assessee, with both claims rejected in favour of the Revenue.

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Issues: (i) Whether the assessee, engaged as a building contractor in construction of dwelling units, was entitled to investment allowance under section 32A(2)(b)(iii) of the Income-tax Act, 1961; (ii) Whether the assessee was entitled to relief under section 80J of the Income-tax Act, 1961.

Issue (i): Whether the assessee, engaged as a building contractor in construction of dwelling units, was entitled to investment allowance under section 32A(2)(b)(iii) of the Income-tax Act, 1961.

Analysis: The entitlement to investment allowance depended on whether the assessee's activity constituted manufacture or production by an industrial undertaking. The construction of dwelling units as a building contractor did not satisfy that test in view of the governing precedent on the meaning of an industrial undertaking for this purpose.

Conclusion: The claim for investment allowance was rejected and the answer was in the negative, in favour of the Revenue.

Issue (ii): Whether the assessee was entitled to relief under section 80J of the Income-tax Act, 1961.

Analysis: The claim under section 80J was dependent on the assessee being an industrial undertaking and on the profits being derived from such undertaking. Once the construction activity was held not to qualify as an industrial undertaking for the relevant purpose, the foundation for section 80J relief failed.

Conclusion: The assessee was not entitled to relief under section 80J, and the answer was in the negative, in favour of the Revenue.

Final Conclusion: Both questions were answered against the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: A building contractor engaged in construction of dwelling units is not, for these purposes, an industrial undertaking entitled to investment allowance or section 80J relief unless the statutory test of manufacture or production is satisfied.

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