1990 (1) TMI 144 - AT - Income Tax

Tribunal Upholds Assessee's Investment Allowance and Deductions under Income-tax Act

The Tribunal affirmed the CIT(A)'s decision, dismissing the Revenue's appeals and upholding the assessee's entitlement to investment allowance and ... Investment Allowance Issues Involved:The judgment involves determining whether the assessee, engaged in the manufacture of arrack, is entitled to investment allowance and deductions under sections 80-I and 80HH of the Income-tax Act, 1961.Details of the Judgment:Issue 1: Claim of Investment Allowance and DeductionsThe assessee claimed investment allowance for machinery and plant installed for manufacturing arrack, contending that the processes involved amount to manufacturing activity. The ITO initially rejected the claim, but the CIT(A) upheld it, considering the blending processes as manufacturing. The Revenue appealed, arguing that blending rectified spirit with water does not constitute manufacturing. Various legal precedents were cited by the Revenue to support their contention.Issue 2: Interpretation of 'Manufacture'The Tribunal analyzed the definition of 'manufacture' in the absence of a specific definition in the Income-tax Act. It emphasized that the activity of making arrack from rectified spirit involves shaping or combining raw materials to produce a new product. The Tribunal compared the case to a Bombay High Court decision involving the creation of a new commercial commodity through mixing substances, which was considered as manufacturing.Issue 3: Comparison with PrecedentsThe Tribunal distinguished the Revenue's cited cases, such as those involving groundnut oil processing, iron ore mixing, and tea blending, from the present case of arrack manufacturing. It highlighted that the processes in the present case resulted in a new commercial commodity, unlike the situations in the cited cases. The Tribunal concluded that the assessee's activity of producing arrack qualifies as manufacturing, entitling them to the claimed benefits under sections 32A, 80-I, and 80HH of the Act.Conclusion:The Tribunal affirmed the CIT(A)'s decision, dismissing the Revenue's appeals and upholding the assessee's entitlement to investment allowance and deductions under the relevant sections of the Income-tax Act, 1961.