1990 (12) TMI 167 - AT - Income Tax

Tribunal upholds denial of investment allowance claim for transportation activities.

Narbod Construction (Private) Limited. Versus Inspecting Assistant Commissioner.

The tribunal dismissed the appeals, affirming the decision to deny the company's claim for investment allowance. It held that the company's activities, ... Investment Allowance Issues:- Entitlement to investment allowance for a company engaged in transport work- Interpretation of industrial activity under section 32A(2)(b)(iii) of the Income-tax Act, 1961Analysis:1. The appeals involved a dispute regarding the entitlement of investment allowance claimed by a company engaged in transport work for the removal of slag and refuse from a factory site. The main contention was whether the company's activities qualified as industrial under section 32A(2)(b)(iii) of the Income-tax Act, 1961.2. The company argued that its work of removing and dumping slag resulted in the development of low lying areas, constituting industrial activity. The company relied on agreements and its Memorandum and Articles of Association to support its claim. Additionally, the company cited legal precedents such as CIT v. Super Drillers, CIT v. Oricon (P.) Ltd., and CIT v. Datacons (P.) Ltd. to bolster its argument.3. The departmental representative contended that the company's primary income source was transport receipts, indicating non-industrial activity. Referring to the agreements and terms with the company's principals, the representative argued that the company was solely engaged in transport work. The representative also cited a tribunal decision regarding a similar case to support the denial of investment allowance.4. Upon review, the tribunal found that the company's activities did not involve any manufacturing process or change in the slag and refuse it transported. The tribunal noted that the company's work was limited to transport and did not constitute industrial activity as defined in the Income-tax Act, 1961. The tribunal pointed out the specific provision disallowing investment allowance for road transport vehicles.5. The tribunal rejected the company's claim of engaging in construction or manufacturing, emphasizing that land did not qualify as an article or thing under the Act. The tribunal distinguished legal precedents cited by the company, highlighting that the activities in those cases involved distinct industrial processes leading to the production of new articles or commodities.6. The tribunal further discussed the object clause of the company's Memorandum of Association, which outlined its main activities as civil engineering contractors for construction projects. The tribunal concluded that the company's work of transporting slag and refuse did not align with its stated objectives of construction on existing land, therefore not qualifying for investment allowance.7. Ultimately, the tribunal dismissed the appeals, upholding the decision of the Commissioner of Income-tax (Appeals) to deny the company's claim for investment allowance. The tribunal affirmed that the company's activities did not meet the criteria for industrial activity under section 32A(2)(b)(iii) of the Income-tax Act, 1961.