1989 (11) TMI 73 - AT - Income Tax

Summary

Issues:
- Challenge to the decision of the Commissioner of Income-tax (Appeals) regarding the entitlement to investment allowance for machinery and plant installed for processing and printing of cinematograph films.

Analysis:
1. The appellant, a private limited company engaged in processing and printing of cinematograph films, claimed investment allowance for new machinery installed. The Income-tax Officer disallowed the claim stating that investment allowance was not admissible as the appellant was not engaged in manufacturing and had hired out the machinery. The appellant contended before the CIT(A) that the machinery was used for its own business, earning revenue, and that it was engaged in the manufacture of articles. The CIT(A) found that the appellant's activities involved two stages: processing of raw films to negative films and production of release prints. The CIT(A) held that during the second stage, where release prints were prepared, the appellant could be said to have manufactured an article, entitling it to investment allowance on the machinery used in this stage.

2. The CIT(A) relied on various decisions to support the conclusion that the appellant's activities in the second stage constituted manufacturing. The CIT(A) also noted that the machinery in question was not hired out and that the appellant had created the necessary investment allowance reserve. The CIT(A) allowed the appeal based on these findings, which the revenue challenged before the Tribunal.

3. The revenue contended that the appellant's activities amounted to processing, not manufacturing, and that the exclusion clause in the law applied to the appellant's case, making it ineligible for investment allowance. However, the appellant argued that its case fell under a different section applicable to small scale industrial undertakings, not covered by the exclusion clause. The appellant's counsel cited precedent cases to support this argument.

4. The Tribunal considered the arguments and precedent cases presented by both sides. It found that the CIT(A)'s decision was correct and upheld it. The Tribunal noted that the appellant was a small scale industrial undertaking and that the exclusion clause referred to by the revenue did not apply to the appellant's case. The Tribunal also referenced a Special Bench decision regarding investment allowance on similar machinery, affirming the allowance in such cases. Consequently, the Tribunal dismissed the revenue's appeal, confirming the order of the CIT(A).