1991 (5) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to investment allowance u/s 32A of the Income-tax Act, 1961.
2. Definition and scope of "industrial undertaking" under the Income-tax Act.
3. Applicability of investment allowance to construction companies.

Summary:

1. Entitlement to Investment Allowance u/s 32A:
The primary issue was whether the assessee, a company engaged in building contracts, is entitled to investment allowance u/s 32A of the Income-tax Act, 1961. The Income-tax Officer denied the relief on the grounds that the machinery was not installed in an "industrial undertaking" and the assessee was merely carrying out contracts for others. The Commissioner of Income-tax (Appeals) and the Tribunal both concluded that the assessee was entitled to the investment allowance, interpreting the scope of section 32A to include businesses engaged in construction.

2. Definition and Scope of "Industrial Undertaking":
The Tribunal found that the assessee was engaged in the production of reinforced concrete slabs and boulders used in construction activities, thus qualifying as an industrial undertaking. The Tribunal's finding that the assessee is engaged in the manufacture and processing of goods was not challenged by the Revenue through an appropriate question. The High Court upheld this view, stating that the term "industrial undertaking" should be construed in its popular sense and includes businesses involved in construction, manufacture, or production of articles or things.

3. Applicability of Investment Allowance to Construction Companies:
The High Court affirmed that the assessee, being a construction company involved in manufacturing and processing materials for its construction activities, qualifies as an industrial undertaking. The Court emphasized that the statutory language of section 32A(2)(b)(iii) is clear and should be interpreted broadly to include construction businesses. The Court referenced various judicial precedents and statutory interpretations to support this view, concluding that the assessee is entitled to investment allowance u/s 32A.

Conclusion:
The High Court answered the referred question in the affirmative, favoring the assessee and against the Revenue. The judgment confirmed that the assessee is entitled to investment allowance u/s 32A of the Income-tax Act, 1961, as the activities carried out by the assessee qualify it as an industrial undertaking.