TaxTMI 
TaxTMI 
2026 (8) TMI 544
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....u/s. 32AC on dispensing units in retail outlets ignoring the fact that the dispensing units do not fall within the meaning of plant and hence, not eligible for claim of deduction u/s. 32AC. 2. Whether on the facts and circumstances of the case and in law, the dispensing units used for marketing and retailing unit can be classified as plant and machinery and used for manufacturing and production and thus eligible for investment allowance u/s. 32AC. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2.1. Revenue also filed additional ground nos. 1 to 9 vide application dated 19.11.2025 for their admission challenging ld. CIT(A)'s decision on the question of jurisdiction of the Jurisdictional Assessing Officer (JAO) to issue notice u/s. 148 of the Act. Since the issues raised are legal in nature, the same are admitted for adjudication. Also, assessee has moved an application dated 18.02.2026 under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 (ITAT Rules) to support the order of ld. CIT(A) appealed against. The ground raised through this application is in regard to validity of the reassessment p....
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....assessee company is engaged in the business of manufacturing and trading of petroleum products. In para 3 of the said reasons, ld. AO has observed that assessee has claimed and the department has allowed a deduction of Rs. 239,71,78,892/- u/s. 32AC of the Act. Assessee, through its submission dated 17.12.2017, had given a detailed breakup of eligible plant and machinery for the purpose of claiming deduction u/s. 32AC. Ld. AO further observed that out of the aforesaid total deduction, assessee has claimed investment allowance @ 15%, amounting to Rs. 7,35,00,000/-, on dispensing units. He further noted that these dispensing units are retail outlets of the assessee meant for delivering petrol/diesel to the customers and therefore, cannot be categorized as plant and machinery meant for manufacturing or producing any article or thing. Ld. AO accordingly observed that the deduction on account of investment allowance u/s. 32AC claimed on dispensing units should be disallowed. 3.3. During the course of re-assessment proceedings, ld. Assessing Officer noted that the assessee had claimed investment allowance u/s. 32AC of the Act @ 15% on the cost of dispensing units amounting to Rs. 49,00....
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....order in the assessee's own case for Assessment Year 1984-85 (supra), placing reliance on the principle that marketing is an industrial consequential activity of the manufacturing process and forms part of the integral business activity. Accordingly, addition of Rs. 7,35,00,000/- was deleted. Aggrieved, Revenue is in appeal before the Tribunal. 5. Ld. CIT DR vehemently argued that ld. CIT(A) grossly erred in deleting the addition of Rs. 7,35,00,000/- made on account of disallowance of investment allowance u/s. 32AC on dispensing units. He submitted that section 32AC specifically mentions the condition for the allowance to the assessee, being engaged in the "business of manufacture or production of any article or thing." Dispensing units, it was contended, are installed at the retail outlets of HPCL and are used exclusively for the commercial activity of retailing petroleum products to end consumers. They have no role whatsoever in the process of manufacture or production of petroleum products, which process is wholly confined to the refineries. Manufacturing activity of HPCL, ld. CIT DR argued, stands completed at the refinery gate and what follows, namely storage, transport....
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....ggregate amount of actual cost of such new assets acquired and installed in any previous year exceeds one hundred crore rupees, then, there shall be allowed a deduction, (a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed during the financial years 2012-13 and 2013-14; (b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed in the financial year 2014-15;" (Emphasis supplied by us by bold and underline) 7.2. On perusal of section 32AC(1), the following relevant conditions for claiming investment allowance emanate: a) Assessee has to be a company; b) It has to be engaged in the business of manufacture or production of any article or thing; c) Investment in new assets costing more than Rs. 100 crores have to be acquired and installed within the specified period, i.e., financial year 2013-14. 7.3. On applying the aforesaid conditions to the facts of the present case, we note that HPCL is an industrial undertaking eng....
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....at dispensing units are plant and machinery for the purposes of section 32AC as well. b) Undisputedly, dispensing units do not fall under any of the exceptions provided under sub-section (4) of section 32AC since: (i) these are new assets and have not been used by any other person in the past; (ii) these are not installed in any office premises or residential accommodation; (iii) these are not office appliances; (iv) these are not vehicles; and (v) the whole of the actual cost of dispensing units is not claimed as deduction under any other provision of the Act. 7.6. We are of the considered view that the issue is covered in favour of the assessee by the Tribunal's order in the assessee's own case for Assessment Year 1984-85 (supra), wherein the very same question was examined under the predecessor provision, i.e., section 32A. In that order, Tribunal was examining whether plant and machinery installed in the Marketing Division of HPCL would qualify for investment allowance when the Revenue's case was that since the Marketing Division was not engaged in the business of manufacture or production of any article, the plant and machinery installed for the busines....
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....nd individual business of manufacture and production of mineral oil and it was only for the sake of facility that it had created separate manufacturing and marketing divisions. In the said case, investment allowance was allowed in respect of new plant and machinery installed in the marketing division. Ratio of this decision is squarely applicable to the facts of the present assessee. 7.8. Nothing cogent has been brought on record by the Revenue to dislodge the Tribunal's well-reasoned finding in the assessee's own case for AY 1984-85 (supra). The principle laid down therein applies with equal force to the present facts. 8. Ld. AO has alleged that since dispensing units are used for retailing, these cannot be said to be used for the purpose of manufacturing or production, and hence do not qualify for the allowance. While holding so, ld. AO has attempted to read into the provisions a condition which does not exist. Ld. AO has failed to appreciate the difference between investment for the purpose of "business of manufacturing" vis-a-vis for the purpose of manufacturing itself. Section 32AC clearly envisages allowance of investment by a company which is in the "business o....
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.... AY 1984-85 order (under s.32A) cannot be extended to a claim under s.32AC, since s.32A has been withdrawn, does not commend itself to us. The ratio of the AY 1984-85 order is not founded on any provision peculiar to section 32A. It is founded on the fundamental nature of HPCL's business as a single, integral and indivisible business of manufacture and marketing, a character which has not changed. The word "business" in section 32AC, as much as in section 32A, necessarily connotes the entire integrated commercial activity, from the commencement of manufacture to the final stage of selling the products and recovering the price. We are, therefore, of the view that the principle that marketing is an industrial consequential activity of the manufacturing process, forming part of the integral business activity, applies with equal force to the language of section 32AC. The dispensing unit at the retail outlet is as much part of the "business of manufacture or production" of HPCL as the distillation columns in its refineries. 9.2. It was also brought to the knowledge of the Bench by ld. Counsel for the assessee that the Department has not challenged this issue before the Hon'bl....