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- Dispute over investment allowance for machinery used in construction of a dam - Interpretation of whether construction of a dam qualifies as an industrial undertaking - Analysis of relevant case laws and their application to the current case The judgment by the Appellate Tribunal ITAT Hyderabad involved an appeal by Progressive Engineering Co. regarding the denial of investment allowance for machinery used in constructing a dam. The dispute centered on whether the construction of a dam qualified as an industrial undertaking under section 32A of the Income-tax Act, 1961. The assessee claimed investment allowance of Rs. 5,02,334 for machinery used in the dam construction project. The Commissioner (Appeals) and the Income Tax Officer (ITO) initially denied the claim, arguing that the assessee was not engaged in manufacturing any article. The Commissioner (Appeals) referenced the decision of the Orissa High Court in a similar case but disagreed with the interpretation that a firm of contractors could be considered an industrial undertaking. The assessee, relying on case laws, argued that the construction of a dam should be considered an industrial activity. The Tribunal analyzed the nature of the machinery used, which included compressors, tippers, crushers, and other equipment necessary for construction work. The Tribunal considered the definition of an industrial undertaking and the requirement under section 32A that machinery should be used for the business of construction, manufacture, or production of any article or thing. The dispute revolved around whether the construction of a dam qualified as an industrial activity. The Tribunal disagreed with the revenue's argument that construction alone would not qualify for investment allowance unless it was related to the construction of an article or thing. The Tribunal cited various case laws, including decisions by the Orissa High Court, Bombay High Court, Delhi High Court, and Calcutta High Court, which supported a broader interpretation of industrial activities. The Tribunal highlighted that the construction of dams, building foundations, and manufacturing processes could be considered industrial activities, even if the word "construction" was not explicitly mentioned in certain legal provisions. Ultimately, the Tribunal allowed the appeal and directed the ITO to reconsider the claim for investment allowance, acknowledging that the assessee's activity qualified as an industrial undertaking engaged in the business of construction or manufacture of articles or things. The decision emphasized the broader interpretation of industrial activities and the eligibility of the assessee for investment allowance based on the nature of the construction project and the machinery used.
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