1982 (4) TMI 102 - AT - Income Tax

Investment allowance denied for retreading tyres as not constituting manufacturing; Tribunal affirms.

The Appellate Tribunal dismissed the assessee's appeal against the rejection of the investment allowance claim, affirming that retreading tyres did not ... - Issues:1. Appeal against rejection of investment allowance claim.2. Determination of whether retreading of tyres constitutes manufacturing for investment allowance eligibility.Analysis:The appeal was filed against the rejection of the investment allowance claim by the Assessing Officer (AO) for the assessment year 1977-78. The assessee, a company engaged in resoling of tyres on contract, claimed to be a manufacturing company entitled to investment allowance under the 9th Schedule of Item No. 17. However, the AO, following a Tribunal decision, disallowed the claim and made an addition to the income of the assessee. The Commissioner of Income Tax (Appeals) upheld the AO's decision, stating that the assessee's activities did not amount to manufacturing as they primarily involved retreading existing tyres rather than manufacturing new ones.During the appeal before the Appellate Tribunal, the assessee failed to appear, leading to an ex parte order. The Departmental Representative argued that the claim for investment allowance was rightly rejected, citing a Supreme Court case as precedent. The Tribunal considered the Supreme Court decision, which established that for a process to be considered manufacturing, it must result in a commercially distinct or different product. The Court held that retreading old tyres did not create a new commercial entity but merely improved the performance of the existing tyre, likening it to resoling old shoes. Consequently, the Tribunal concluded that retreading tyres did not constitute manufacturing and, therefore, the assessee was not eligible for the investment allowance.Ultimately, the Tribunal dismissed the assessee's appeal, affirming the lower authorities' decision to reject the investment allowance claim. The judgment emphasized that the retreading of tyres did not amount to manufacturing, as per the Supreme Court's definition, and thus upheld the disallowance of the investment allowance claim.