Court denies investment allowance claim to assessee primarily involved in granite block trading, not qualifying as industrial company.

The court held that the assessee was not eligible for investment allowance under section 32A of the Income-tax Act, 1961 as they were primarily involved in purchasing and selling granite blocks for export with minimal processing activities, not constituting manufacturing or processing of goods. The court determined that the assessee did not qualify as an industrial company due to the marginal nature of its processing activities, emphasizing that the main activity of selling or exporting already processed granite blocks did not elevate its status. Consequently, the revenue authorities' decision was upheld, denying the investment allowance claim.

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Issues involved:
1. Whether the assessee qualifies as an industrial company under section 2(7)(c) of Finance (No. 2) Act, 1977Rs.
2. Whether the assessee is entitled to investment allowance under section 32A of the Income-tax Act, 1961 for mobile crane and air compressorRs.

Issue 1:
The assessee claimed investment allowance for mobile crane and air compressors used in its business. The assessing authority contended that the machinery was used in open cast mining, which does not fall under the concept of manufacturing or processing of goods as per section 32A(2)(b)(iii) of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) affirmed this decision, stating that the assessee was primarily involved in purchasing and selling granite blocks for export, with minimal processing activities. The Appellate Tribunal upheld this view, concluding that the assessee was not engaged in processing activities, and therefore, not eligible for investment allowance.

Issue 2:
The assessee argued that it should be considered an industrial company as the sizing and polishing of granite stones constituted processing of goods. However, the courts found that the main activity of the assessee was the sale or export of granite blocks that were already processed by the sellers to meet the assessee's specifications. The courts emphasized that the processing activities carried out by the assessee were marginal and did not elevate its status to that of an industrial company. Citing a previous case, it was held that the nature of the main activity determines the classification of the company, and in this case, the assessee did not qualify as an industrial company. Therefore, the questions were answered in favor of the revenue authorities.

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