Investment allowance and cold storage operations fail the manufacture or production test under section 32A.

Investment allowance under section 32A is confined to new machinery or plant installed in an industrial undertaking used for the manufacture or production of an article or thing. A cold storage unit merely preserves goods through refrigeration and does not bring into existence a distinct marketable commodity, so its operations do not satisfy the statutory test of manufacture or production. On that reasoning, machinery installed in a cold storage business is not eligible for investment allowance under section 32A(2)(b)(ii), and the Revenue's position on ineligibility was upheld.

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Issues: Whether a cold storage business falls within section 32A(2)(b)(ii) of the Income-tax Act, 1961 so as to entitle the assessee to investment allowance on machinery installed in the cold storage.

Analysis: Investment allowance under section 32A is available only where the new machinery or plant is installed in an industrial undertaking for the purposes of business of manufacture or production of an article or thing. The controlling requirement is not merely that some activity is carried on, but that the activity results in the manufacture or production of a distinct article or thing. A cold storage preserves goods and does not bring into existence any new or distinct marketable commodity. The operation of refrigeration is not the manufacture or production of an article or thing within the meaning of the provision.

Conclusion: The cold storage business is not covered by section 32A(2)(b)(ii), and the machinery installed therein is not entitled to investment allowance.

Final Conclusion: The reference was answered against the assessee and the Revenue's position on eligibility for investment allowance in cold storage operations was upheld.

Ratio Decidendi: Investment allowance under section 32A is confined to machinery or plant used for manufacture or production of an article or thing, and a cold storage that merely preserves goods without creating a new marketable commodity does not satisfy that condition.

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