1983 (12) TMI 87 - AT - Income Tax

Summary

Issues:
- Whether the assessee company qualifies as a manufacturing company for claiming investment allowance under the Income-tax Act, 1961.
- Whether the Xerox copies made by the assessee can be considered as an 'article or thing' for the purpose of investment allowance.
- Whether the assessee's activity of photocopying documents qualifies as an industrial undertaking for investment allowance under section 32A.

Analysis:
1. The judgment involves two appeals by the revenue concerning the income-tax assessments of a company deriving income from photocopying documents for the assessment years 1979-80 and 1980-81.
2. The primary issue revolves around the eligibility of the assessee as a manufacturing company to claim investment allowance. The Commissioner (Appeals) directed the allowance based on the argument that the process of making Xerox copies involved various materials and machinery, akin to a manufacturing process.
3. The departmental representative contended that the photocopying activity did not constitute manufacturing, but rather job works for clients, thus not meeting the criteria for investment allowance under section 32A of the Income-tax Act.
4. The counsel for the assessee argued that the machinery and materials used in the photocopying process, as well as the decision in CIT v. Ajay Printery (P.) Ltd., supported the claim for investment allowance.
5. The Tribunal analyzed whether the assessee could be considered an industrial undertaking and whether the Xerox copies qualified as 'articles or things' for investment allowance. The Tribunal concluded that the activity was service-based, not manufacturing, and the Xerox copies were not mercantile commodities meant for sale.
6. The Tribunal likened the assessee's work to that of a job typist or copyist, emphasizing that the activity did not constitute an industrial undertaking eligible for investment allowance under section 32A.
7. Drawing a distinction from the Gujarat High Court decision in Ajay Printery (P.) Ltd.'s case, the Tribunal reversed the Commissioner (Appeals) orders, disallowing the investment allowance claim for the assessee in both years.
8. Ultimately, the appeals were partly allowed, with the Tribunal ruling against the assessee's eligibility for investment allowance as a manufacturing company under section 32A of the Income-tax Act, 1961.