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- Entitlement for investment allowance under section 32A for construction of road. Analysis: The judgment pertains to a reference made by the Tribunal under section 256(2) of the Income-tax Act, 1961, regarding the entitlement of an assessee for investment allowance under section 32A when engaged in the construction of roads. The assessee, a civil contracts firm, claimed investment allowance for machinery costs for the assessment year 1987-88. The Assessing Officer initially denied the claim, but the Commissioner of Income-tax (Appeals) allowed it. The Revenue appealed to the Tribunal, which upheld the Commissioner's decision. The Revenue then sought reference to the High Court, which was initially declined by the Tribunal but later allowed by the High Court. The Revenue contended that the activity of the assessee did not amount to manufacturing, citing a Supreme Court decision in CIT v. N. C. Budharaja and Co. The assessee argued that their construction of roads involved manufacturing activities and relied on other case laws to support their claim. The High Court analyzed the facts and legal precedents, including the Budharaja case, which discussed whether construction activities like dams can be considered manufacturing. The High Court concluded that the construction of roads, similar to dams, bridges, and canals, does not involve manufacturing articles, as per the Budharaja case. Therefore, the High Court held in favor of the Revenue, stating that the assessee was not entitled to claim investment allowance under section 32A. The High Court dismissed the relevance of the cases cited by the assessee, emphasizing that they were not applicable to the current scenario and did not support the assessee's position. The High Court clarified that the cases cited by the assessee did not address the core issue on the merits but rather focused on procedural aspects. Consequently, the High Court answered the reference in favor of the Revenue and against the assessee, denying the entitlement for investment allowance under section 32A for the construction of roads. Overall, the judgment provides a detailed analysis of the legal principles involved in determining the eligibility for investment allowance under section 32A concerning construction activities and highlights the significance of relevant case laws in reaching a decision.
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