1992 (9) TMI 136 - AT - Income Tax

Construction businesses not eligible for investment allowance, Tribunal rules.

The Tribunal ruled in favor of the revenue, holding that the assessee, a civil contractor not engaged in manufacturing or production, was not eligible for ... Investment Allowance, Small Scale Undertaking Issues:Claim of investment allowance by the assessee-firm, eligibility of civil contractor for investment allowance, interpretation of section 32A(2)(b)(ii) and (iii) regarding industrial undertakings, conflicting decisions on eligibility of contractors for investment allowance.Analysis:The revenue appealed against the decision of the CIT(Appeals) allowing the investment allowance claimed by the assessee-firm, arguing that the assessee, a civil contractor, was not eligible for investment allowance as it was not an industrial undertaking engaged in manufacturing or production. The revenue contended that even if considered a small scale industrial undertaking, being a contractor in construction work did not entitle the assessee to the benefit of investment allowance. The revenue cited decisions from the Hon'ble Bombay High Court to support its argument that construction companies were not entitled to investment allowance. The revenue highlighted that as per section 32A(2)(b)(iii), investment allowance was only available to industrial undertakings engaged in construction, manufacture, or production, not falling under small scale industrial undertakings.The assessee's counsel acknowledged unfavorable decisions against contractors in construction businesses but cited various cases where contractors were allowed the benefit of investment allowance. The counsel argued that the assessee could be covered under section 32A(2)(b)(ii) as an industrial undertaking engaged in construction. The counsel emphasized that when two views were possible, the one favorable to the assessee should be considered, citing the decision in CIT v. Vegetable Products Ltd. The counsel also referred to the decision of the Hon'ble Karnataka High Court in Shankar Construction Co., supporting the eligibility of construction businesses for investment allowance.Upon careful consideration, the Tribunal ruled in favor of the revenue, reversing the decision of the CIT(Appeals). The Tribunal noted that while various cases were cited, most dealt with the eligibility of contractors for investment allowance. The Tribunal analyzed the language of section 32A(2)(b)(ii) and (iii) and concluded that small scale industrial undertakings engaged solely in construction were not entitled to investment allowance, unlike other industrial undertakings. The Tribunal held that the assessee, a civil contractor not engaged in manufacturing or production, was not eligible for investment allowance. The Tribunal distinguished between small scale industrial undertakings and other industrial undertakings, emphasizing that the benefit of investment allowance was not available to small scale undertakings engaged only in construction.In conclusion, the Tribunal found that none of the cases cited by the assessee supported its case, and the benefit of investment allowance could not be extended to small scale undertakings solely engaged in construction. Therefore, the Tribunal allowed the appeal filed by the revenue, holding that the assessee was not entitled to the investment allowance.