Investment allowance granted for machinery in cold storage facility under Income-tax Act

The High Court held that machinery in a cold storage facility qualifies for investment allowance under section 32A(2)(b)(ii) of the Income-tax Act, 1961, even if it does not produce marketable articles. The court rejected the Revenue's argument that marketability is a prerequisite for eligibility, emphasizing that the produced article need not be a commercial commodity. Relying on precedent, the court determined that the machinery involved in the preservation process meets the criteria of producing an article or thing, entitling the assessee to the investment allowance. The decision favored the assessee, with no costs awarded.

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Issues: Admissibility of investment allowance for machinery in cold storage under section 32A(2)(b)(ii) of the Income-tax Act, 1961.

The judgment by the High Court of Punjab and Haryana addressed the issue of whether machinery or plant installed for the purpose of a cold storage business is eligible for investment allowance under section 32A(2)(b)(ii) of the Income-tax Act, 1961. The assessee, S. Warriam Singh Cold Stores, claimed a deduction for machinery and plant installed in their cold storage business during the assessment year 1978-79. The Income-tax Officer and the Appellate Assistant Commissioner denied the claim, but it was accepted by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal, leading to the reference question before the court.

The Revenue relied on judgments from the High Courts of Calcutta and Madhya Pradesh, arguing that machinery in cold storage is not eligible for investment allowance as it does not produce new marketable articles. However, the court disagreed with this interpretation, stating that the provisions of section 32A(2)(b)(ii) do not require the produced article to be marketable or a commercial commodity. The court rejected the notion of marketability as a requirement for investment allowance eligibility.

The court referred to a previous case involving a cold storage business, where it was held that the process in a cold storage facility falls within the definition of a "manufacturing process," entitling it to depreciation benefits. Additionally, the court cited a judgment from the High Court of Andhra Pradesh, which allowed investment allowance for machinery used in drilling borewells, emphasizing that the end product need not be materially different for eligibility.

Ultimately, the court agreed with the Tribunal's view that machinery in a cold storage facility fulfills the condition of producing an article or thing, which is later used for the preservation of goods. The court highlighted that intermediate processes of manufacture are also eligible for investment allowance under section 32A. As a result, the reference was answered in favor of the assessee, with no order as to costs.

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