1985 (12) TMI 70 - AT - Income Tax

Summary

Issues:
Claim of reliefs under sections 32A, 80HH, and 80J of the Income-tax Act, 1961 by the assessee.

Analysis:
The appeal before the Appellate Tribunal ITAT Allahabad involved the contention that the Commissioner (Appeals) erred in denying the assessee's entitlement to reliefs under sections 32A, 80HH, and 80J of the Income-tax Act, 1961. The assessee, a firm, had entered into an agreement with another company for quarrying and construction work. The Income Tax Officer (ITO) had denied the reliefs, considering the assessee as a contractor not engaged in industrial activities. The Commissioner (Appeals) also found that the main contracting company was already benefiting from the sections in question, and the assessee was only providing ancillary services. The Tribunal, however, held that the assessee was entitled to the reliefs as its activities constituted an industrial undertaking involving the manufacturing process. This decision was supported by the precedent set by the Madras High Court in CIT v. M.R. Gopal [1965] 58 ITR 598, establishing that converting boulders into small stones with machinery qualifies as a manufacturing process.

The departmental representative argued that the assessee's product was intermediary and not the final product, referencing a decision by the Bombay High Court in a similar case. However, the Tribunal disagreed, noting that the assessee's activities were independent of the main contracting company and were considered manufacturing processes. The Tribunal relied on the principle established in CIT v. Pressure Piling Co. (India) (P.) Ltd. [1980] 126 ITR 333, which clarified that even products made for specific use or site could still be considered manufactured products. The Tribunal concluded that the assessee was indeed engaged in the production of articles independently of the main contractor and, therefore, entitled to the reliefs under the relevant sections of the Income-tax Act, 1961.

In conclusion, the Appellate Tribunal ITAT Allahabad allowed the appeal, overturning the decision of the Commissioner (Appeals) and granting the assessee the reliefs under sections 32A, 80HH, and 80J of the Income-tax Act, 1961.