1984 (11) TMI 350 - AT - Income Tax

Summary

Issues Involved:
1. Investment allowances under section 32A.
2. Relief under section 80J.
3. Requirement of Form No. 10D for section 80J relief.
4. Entitlement to extra shift allowance on transformers.

Detailed Analysis:

1. Investment Allowances under Section 32A:
The primary issue was whether the activities of the assessee, involving bleaching, dyeing, calendering, and printing of textiles, constituted "manufacture" under section 32A(2)(b)(iii) of the Income-tax Act, 1961. The department argued that these activities were merely processing and did not result in a new article or thing. They referenced several cases, including Union of India v. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791, to support their claim that no new article was produced, thus disqualifying the assessee from investment allowances.

The assessee countered by citing the Bombay High Court's decision in New Shakti Dye Works (P.) Ltd. v. UOI 1983 ECR 1143D, which held that processes like bleaching, dyeing, and printing transformed grey cloth into a distinctively new article known in the market. The Tribunal agreed with the assessee, emphasizing that the processes resulted in a new product with a different name, character, and use, thus qualifying as "manufacture."

2. Relief under Section 80J:
The second issue was whether the assessee was entitled to relief under section 80J, which also hinged on whether their activities constituted "manufacture." The Tribunal, consistent with its findings on the investment allowance issue, held that the assessee's activities did amount to manufacture. The Tribunal also noted that the Madras High Court's decision in United Bleachers (P.) Ltd.'s case was not relevant, whereas the Bombay High Court's decision was directly applicable and supportive of the assessee's claim.

3. Requirement of Form No. 10D for Section 80J Relief:
The department contended that the assessee was not eligible for section 80J relief as it did not file Form No. 10D along with the return of income. The Tribunal rejected this contention, noting that the Commissioner (Appeals) had correctly pointed out that the requirement of Form No. 10D would become material only in the year when the assessee actually becomes eligible for deduction, i.e., when there are profits in the concerned undertaking. Since the assessee had incurred a loss in the relevant year, the issue was deemed academic and not practically significant.

4. Entitlement to Extra Shift Allowance on Transformers:
The final issue pertained to whether the assessee was entitled to extra shift allowance on transformers used in the textile processing machinery. The department argued that transformers were specifically excluded from extra shift allowance under Part I of Appendix I to rule 5 of the Income-tax Rules. The Tribunal, however, agreed with the assessee that the transformers were an integral part of the textile processing machinery and not independent items. Therefore, they were eligible for extra shift allowance as part of the machinery entitled to the general rate of depreciation.

Conclusion:
The Tribunal dismissed the department's appeals for both assessment years 1979-80 and 1980-81, holding that the assessee was entitled to:
1. Investment allowance under section 32A.
2. Relief under section 80J.
3. Extra shift allowance on transformers used in the textile processing machinery.

The Tribunal also clarified that the requirement of Form No. 10D was not applicable for the assessment year in question, as the assessee had incurred a loss.