TaxTMI 
TaxTMI 
2005 (9) TMI 62
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....al and the Commissioner of Income-tax (Appeals) vide his order dated April 30, 1992, allowed the said claim upsetting the findings recorded by the Assessing Officer and the appeal preferred by the Revenue before the Income-tax Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals) has been dismissed on May 20, 1999. Feeling aggrieved by the aforesaid orders, the present appeal has been filed by the Revenue. The facts relevant for the present controversy are that the assessee had maintained two sets of accounts in the relevant assessment year, wherein he carried on two businesses, namely, one that of tyres and the other of running an industry of printing on tin plates. The assessee had maintained two sets of account; one head office set styled M/s. Daljeet Tyres and the other branch set styled M/s. Satguru Metal Printers. The assessee claimed that his tin printing unit was an industry involved in a manufacturing process and therefore, was entitled to the benefit of investment allowance, which he claimed at Rs. 3,79,285.40 in the retUrn for which adequate reserve of Rs. 2,85,000 had also been credited in tne books of account. The investment allowance w....
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....succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance, equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee: Provided that.... (2) The ship or aircraft or machinery or plant referred to in subsection (1) shall be the following, namely: (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft; (b) any new machinery or plant installed after the 31st day of March, 1976,- (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule:" In accordance with section 32A, sub-section (2)(b)(ii), the machinery or plant as specified under sub-section (2)(b) has to be installed by the assess....
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....t was something different from the negative or the white paper which was inserted in the machine, and it was coming in different sizes. Therefore, if the operation of the machine was taken into consideration along with the final product, it would be clear that the assessee was manufacturing an article with the machine." The Tribunal thus allowed the claim of investment allowance under section 32A. In the case of Asst. CIT v. Soni Photo Films P. Ltd. [2000] 245 ITR (AT) 11 (Delhi) [SB], the assessee was engaged in the business of developing and printing of photographs. The assessee filed his income-tax return for the first year of business along with the audited balance-sheets and profit and loss account showing "loss" income, and claimed investment allowance on purchase of photographic apparatus. The Assessing Officer disallowed the investment allowance on the ground that the activity of the assessee did not involve manufacture or production of an article or thing and also because the assessee had failed to create statutory reserve which was the sine qua non for claiming investment allowance. The Commissioner (Appeals) held that in the absence any statutory reserve the assess....
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....ve film loses its identity completely and the photo is quite a different commercial commodity having its own identity, character and end-use. Therefore, what is involved while taking a photograph by a photographer is manufacture." The case of Asst. CIT v. Kohli Bros. Colour Lab. P. Ltd. decided by the Income-tax Appellate Tribunal, Allahabad Bench "A", Allahabad for the assessment year 1986-87 on March 17, 1999, is also placed before us, where it was the case of the Revenue that photographic apparatus and goods being articles or things listed in the Xlth Schedule, the assessee is not entitled to investment allowance under section 32A of the Income-tax Act on the imported computerized colour process machine. The Tribunal accepted the finding recorded by the Commissioner of Income-tax (Appeals), which said that the appellant was not correct in holding that the appellant was engaged in the business of manufacture of any of the items as specified in the Xlth Schedule and that the appellant was not manufacturing any photographic apparatus or equipment and relying upon the judgment of the Calcutta Bench "B" in the case of Amiya Kumar Tarfdar v. ITO referred to above, the assessee was ....
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.... which provides computer services to other concerns was an industrial undertaking engaged in the business of manufacture or production and was thus eligible for investment allowance under section 32A of the Act on the cost of computer. The apex court in the case of CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308 ; [1998] ; 3 SCC 605, had an occasion to consider the meaning, import and scope of section 32A. In the said case the claim of investment allowance was made by the assessees, which were financial companies. They were not themselves manufacturers of any article or thing. They purchased machinery and hired out the same to manufacturers under agreements of hire. The hirer-manufacturer in turn used the machinery for the purposes specified in section 32A(2)(b)(iii). The agreement of hire did not involve any element of sale. The High Courts of Karnataka and Madras held the respondent-assessees to be entitled to investment allowance under section 32A of the Act. The plea of the appellant-Revenue that investment allowance can be claimed by the assessee only in a case where the assessee is the owner of the machinery and also uses the machinery himself and not otherwise, was ....
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....ting ships or aircrafts and the allowance will not be available in respect of ships or aircraft acquired by other taxpayers.' In respect of new machinery or plant installed after March 31, 1976, however, the circular does not prescribe any such condition of the assessee himself carrying on the business of manufacturing. The circular thus clearly brings out the difference between section 32A(2)(a) and section 32A(2)(b)" The Allahabad High Court in the case of Singh Engineering Works P. Ltd. v. CIT [1979] 119 ITR 891, while considering the deductions under section 80-I of the Income-tax Act, 1961, which have since been omitted by the Finance Act, 1972, with effect from April 1, 1973, laid down that the broad distinction between manufacture and production is that manufacture brings into existence a new product, a product which is of a different chemical composition or whose integral structure is different from the raw materials. Production, as distinguished from manufacture, is nothing except bringing into existence a product after processing the raw materials in a manner which may not change the inherent quality or chemical composition of the raw material and, therefore, if iron b....