TaxTMI 
TaxTMI 
1993 (8) TMI 50
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....h the accounting period ended on December 31, 1977. For the assessment year 1978-79, the assessee claimed deduction of Rs. 47,549 being contribution to an unrecognised executive staff provident fund. Since the fund was not a recognised one, the Income-tax Officer disallowed the deduction. In appeal, the Commissioner of Income-tax (Appeals) directed the Income-tax Officer to allow the deduction. The Appellate Tribunal, following its decision in the case of the very same assessee for the earlier year (1977-78), held that it is an admissible deduction. The assessee had also claimed investment allowance of Rs. 12,417 in respect of machinery installed by the assessee for curing of coffee. The Income-tax Officer held that investment allowance under section 32A of the Act is admissible only in relation to machinery or plant installed in a small-scale industrial undertaking for the purpose of the business of manufacture or production of any article or thing and that it is difficult to conceive the process of curing coffee as a process involving manufacture or production and the Income-tax Officer disallowed the allowance. In appeal, the Commissioner of Income-tax (Appeals), by order dated ....
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....firmative, against the Revenue and in favour of the assessee. Counsel on both sides invited us to a catena of decisions for the purpose of deciding whether curing of coffee amounts to manufacture. Sections 32A(1) and 32A(2)(b) of the Income-tax Act, 1961, are relevant in this context. They are as follows : "32A. Investment allowance.-(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately 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 no deduction shall be allowed under this section in respect of - . . . . (2) The ship or aircraft or machinery or plant refer....
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.... fall in the realm of manufacture. We should at once say that the decisions referred to us by both the parties were rendered in different contexts while considering different legislations. It is doubtful whether any general principle applicable to all cases can be gleaned from the said decisions. The Constitution Bench of the Supreme Court had reviewed the decisions in the context of the Central Excises and Salt Act. In those decisions, the Supreme Court has referred with approval to the decisions rendered under the sales tax legislations. In particular, the general concept of the word "manufacture" has been highlighted at least in a few decisions. We shall deal with the landmark decisions of the Supreme Court on the subject. The three cases to which we shall refer (illustrative and not exhaustive) arose under the Central Excises and Salt Act, 1944. In Union of India v. Delhi Cloth and General Mills Co. Ltd., AIR 1963 SC 791, a Constitution Bench of the Supreme Court, in paragraph 14 of the judgment, quoted the following passage of general application from the book Permanent Edition of Words and Phrases, Vol. 26 (at page 795) : "'Manufacture' implies a change, but every change i....
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....ntitled to the relief under section 32A of the Act. The plea was that the said finding being one of fact, no question of law arises for consideration in this case. Strong reliance was placed on the decision of the Supreme Court in CIT v. Tiecicon P. Ltd. [1987] 168 ITR 744. In that case, the question was whether the assessee was an "industrial company" as defined in section 2(6)(d) of the Finance Act, 1968, and section 2(6)(c) of the Finance Acts of 1969 and 1970. The Appellate Tribunal, in that case, held that the assessee was an "industrial company" as defined in the Finance Act as meaning a company which, among other things, is mainly engaged in the manufacture or processing of goods. The Income-tax Appellate Tribunal rejected the application filed by the Revenue for reference under section 256(1) of the Income-tax Act, wherein the question was "whether the assessee-company was an 'industrial company' in terms of the definition." The High Court also dismissed the application filed by the Revenue under section 256(2) of the Act. In the appeal filed before the Supreme Court, it was held that the Income-tax Appellate Tribunal and the High Court were right in holding that the questi....
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....ur opinion, the decision of the Income-tax Appellate Tribunal (Bangalore Bench) in the case of Bharathi Coffee Curing Works [1979] 2 Taxman 482, turned on its own facts and the materials that were available before the Tribunal in that case to reach the conclusion that curing of coffee amounts to manufacturing activity are not available in this case. We shall examine the decision in Bharathi Coffee Curing Works v. First ITO [1979] 2 Taxman 482 in detail. In Bharathi Coffee Curing Works' case [1979] 2 Taxman 482, the activity of the assessee was coffee curing. A note was submitted by the assessee explaining the activities of the assessee's coffee curing works. The said note was to the following effect (at page 483) : "We are agents of the Coffee Board. We receive coffee from the planters and it has to be cured as per the standard fixed by the Coffee Board. After the coffee is received from the planters, the coffee should be taken for curing after it is properly dried as per standard weight fixed by the Coffee Board. The machinery used for curing will be about 20 in numbers from the initial stage to the final product. Even though the finished product is treated as only 'coffe....
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....its order (at page 484): "6. Applying these rulings to the activity of the assessee, it is, in our opinion, quite clear that the assessee is engaged in the manufacturing or production of goods. If dehusking the paddy for removing the husk is a process of manufacture, then dehusking coffee by removing the husk by peeler, as is clear from the note extracted above, would be a process of manufacturing. That apart, as is stated in the note, there are about 20 machines involved in the curing of coffee and what is done by the assesses is not merely a processing activity but is a manufacturing process." So, it is evident from the above that the details regarding the activities done by the assessee for curing coffee were available and that the Tribunal adverted to the said activities and also stated that there are 20 machines involved in the curing of coffee and so the activity is a manufacturing process. The conclusion that the assessee was engaged in a manufacturing process entitling it to the initial depreciation under section 32(1)(vi) of the Income-tax Act was arrived at by the Tribunal after adverting to the basic and necessary facts in detail. Unfortunately, in this case, no ma....