Tribunal grants investment allowance for manufacturing machine under Income-tax Act

The Tribunal ruled in favor of the assessee, holding that the machine purchased qualified as manufacturing an article under section 32A of the Income-tax Act. The Tribunal found that the machine engaged in a manufacturing process by accepting negatives, cutting paper, applying chemicals, and delivering finished products. The Tribunal considered the samples presented and the assessee's registration as a small-scale industry engaged in printing and developing various articles. Consequently, the Tribunal overturned the Commissioner's decision and upheld the investment allowance granted by the Income Tax Officer.

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Issues:
1. Whether the assessee was rightly allowed investment allowance under section 32A of the Income-tax Act.
2. Whether the machine purchased by the assessee qualifies as manufacturing an article within the meaning of section 32A.

Analysis:

Issue 1:
The Commissioner found the investment allowance granted to the assessee for the assessment year 1980-81 to be erroneous and prejudicial to the revenue's interest. The Commissioner based this decision on the requirement that the new machinery must be engaged in the business of manufacturing or producing goods for the investment allowance under section 32A. The Commissioner concluded that the computerized photographic equipment purchased by the assessee did not involve a process of manufacture or production as required by the provision. The Commissioner directed the Income Tax Officer (ITO) to recompute the total income by withdrawing the investment allowance.

Issue 2:
The assessee argued that the Durst Machine purchased was indeed manufacturing an article within the meaning of section 32A. The machine accepted negatives, cut paper into different sizes, applied chemicals, and delivered finished products. The assessee presented samples of the printed products to demonstrate the manufacturing process. The counsel for the assessee referenced a previous court decision to support the argument that the printing done by the machine constituted manufacturing. Additionally, the assessee was registered as a small-scale industry and was engaged in printing and developing various articles using the machine. The counsel highlighted that the Tribunal had previously allowed investment allowance on similar machines like X-ray machines. Considering these factors, the Tribunal held that the machine purchased by the assessee qualified as manufacturing an article under section 32A. Therefore, the order of the ITO granting the investment allowance was deemed correct, and the Commissioner's decision was set aside.

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