1995 (7) TMI 124

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....aged in the manufacture and sale of industrial alcohol for the asst. yr. 1986-87 for which the previous year ended on 31st Dec., 1985. The assessee company filed its return of income claiming a net loss of Rs. 16,54,000. The assessment was completed under s. 143(3) determining the total loss at Rs. 12,94,316. The AO allowed investment allowance of Rs. 57,625 on the plant and machinery installed during the relevant accounting year. On a scrutiny of the assessment records the learned CIT found that the investment allowance granted by the AO is not in accordance with the provisions of law. Therefore he came to the opinion that the assessment is not only erroneous but also prejudicial to the interests of the Revenue. He noticed that the distill....

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....fore us that the appellant is a licensed manufacturer of rectified spirit from molasses, that the licence clearly states that the appellant has to manufacture alcohol including rectified spirit and denatured spirit; that the rectified spirit and denatured spirit are not potable or consumable liquors and they are not in the nature of bear or wine which are specifically mentioned in the Eleventh Schedule; that the assessment made by the AO allowing investment allowance on the plant and machinery installed by the assessee in the previous year is neither erroneous nor prejudicial to the interests of the Revenue and that the view taken by the CIT that the assessee company was producing an article or thing falling in item 1 of Eleventh Schedule i....

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....ure alcohol including rectified spirit and denatured spirit. The said licence which was originally issued for the period 26th Nov., 1975 to 31st March, 1976 was being renewed by the said Excise Commr. from year to year. Industrial alcohol/rectified spirit is not potable. Rectified spirit is basic raw-material for potable liquors. Investment allowance claimed by the assessee and allowed by the ITO was only on the machinery used for the manufacture of rectified spirit which is not a potable liquor like wine or beer which could fall within the scope and ambit of other alcoholic spirit appearing in item 1 of Eleventh Schedule. The main activity of the assessee company is the manufacture of rectified spirit. However, sometimes it was forced by t....