2006 (8) TMI 144

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.... assessee is not entitled to investment allowance under section 32A of the Income-tax Act amounting to Rs. 7,87,652 in the assessment year 1986-87 and Rs. 14,37,943 in the assessment year 1987-88?" The short facts necessary for disposal of the present reference are that the assessee is a partnership firm carrying on the contract work for Gujarat Mineral Development Corporation ("G.M.D.C.") at Pandhro and Rajpadhi and Jagadia. The assessee is engaged in the work of mining and excavation of lignite, including removal of overburden, at Rajpadhi and Pandhro. The assessee claimed investment allowance of Rs. 7,87,652 in the assessment year 1986-87 and Rs. 14,37,943 in the assessment year 19&7-88 on the total costs of the plant and machinery in....

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.... by the learned representatives of the parties, recorded its findings observing that the activity of removal of overburden/earth excavation work carried out by the assessee for facilitating mining at the lignite project site at Rajpardi and Pandhro was mainly a service and labour contract; the use of sophisticated plant for carrying out such works contract does not result in any manufacture or production of any article or a thing, which would be a condition precedent for grant of investment allowance. It was also held that the observations made by the Supreme Court in paragraph 5 in the matter of CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 were, in fact, to run against the interest of the assessee. The Tribunal, accordingly, allowed t....

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....in the Eleventh Schedule. A fair understanding of section 32A would make it clear that any new machinery or plant, which is installed after the 31st day of March, 1976, would be entitled to investment allowance if it is used in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing. In the matter of N. C. Budharaja and Co. [1993] 204 ITR 412, the Supreme Court had observed that construction of road, dam or things like that, would not come within the sweep of manufacture or production of a thing. Their Lordships were of the opinion that production and manufacture would be something different from construction. The case of CIT v. N. C. Budharaja and Co. [1993] 204 IT....

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....or excavating, mining and processing mineral ore under section 32A. The Supreme Court also observed that it would not be necessary that the mined ore must be a commercially new product for the purpose of section 32A. There also, the question was that would the assessee be entitled to investment allowance if the plant owned by the assessee was wholly used for the purposes of the assessee's business under section 32A(1) if the plant was installed after 31st March, 1976. In the matter of CIT v. Sesa Goa Ltd. [2004] 271 ITR 331 ; [2004] 3 RC 645, the Supreme Court has taken into consideration the judgment in the matter of CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 and has quoted the following passage from the said judgment: "The wo....