1998 (2) TMI 71 - HC - Income Tax

Assessee entitled to investment allowance under Income-tax Act for manufacturing activities

The court affirmed that the assessee commenced commercial production from December 1, 1983, engaged in manufacturing activities, and was entitled to ... Investment Allowance Issues Involved:1. Commencement of commercial production.2. Engagement in manufacturing activity.3. Entitlement to investment allowance for plant and machinery.Summary:Issue 1: Commencement of Commercial ProductionThe court examined whether the assessee commenced commercial production from December 1, 1983. The Commissioner of Income-tax (Appeals) relied on various documents, including a report to SIPCOT, board meeting minutes, and a letter from BOFCO Engineering Services, confirming the start of production. The Tribunal upheld this finding, stating it was a question of fact and not referable to the court. The court concurred with the Tribunal, affirming that the assessee commenced production on the specified date.Issue 2: Engagement in Manufacturing ActivityThe court analyzed whether the assessee's activities constituted 'manufacturing activity.' The assessee received raw crankshafts, forgings, and castings, subjecting them to heat treatment to enhance their properties for use in the automobile industry. The Tribunal and Commissioner of Income-tax (Appeals) concluded that this process resulted in a qualitative change, creating a new product fit for a different purpose. The court referred to various literatures and judicial precedents, concluding that the heat treatment process indeed constituted a 'manufacturing activity.'Issue 3: Entitlement to Investment AllowanceThe court examined whether the assessee was entitled to investment allowance u/s 32A of the Income-tax Act. Given that the assessee's activities were deemed manufacturing, the court held that the assessee was entitled to investment allowance for the assessment years 1984-85, 1985-86, and 1986-87. The Tribunal's decision to not deduct the Central subsidy from the cost of assets for depreciation and investment allowance was also upheld, following the precedent set in Srinivas Industries v. CIT.Conclusion:The court affirmed the Tribunal's findings on all issues, holding that the assessee commenced commercial production from December 1, 1983, engaged in manufacturing activities, and was entitled to investment allowance u/s 32A of the Income-tax Act for the relevant assessment years. The tax case petitions were disposed of with no order as to costs.