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- Jurisdiction of the Commissioner under section 263 - Entitlement to investment allowance on machinery and plant used in the business - Merger of the assessment order in the order of the appellate authority Analysis: Jurisdiction of the Commissioner under section 263: The appeal involved a dispute regarding the jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961. The Commissioner set aside the assessment order, directing the ITO to withdraw the investment allowance and conduct a fresh assessment. The appellant contended that the Commissioner had no jurisdiction under section 263 as the assessment order was under appeal before the Commissioner (Appeals). The appellant relied on the decision of the Special Bench of the Tribunal in Dwarkadas & Co. (P.) Ltd. v. ITO [1982] 1 SOT 495 (Bom.) to support this argument. However, the respondent argued that the order of the Commissioner (Appeals) had not been decided when the Commissioner exercised powers under section 263, thus the assessment order had not merged at that point. The Tribunal found that the Commissioner's order under section 263 was justified, upholding the Commissioner's jurisdiction in this matter. Entitlement to investment allowance on machinery and plant used in the business: The core issue revolved around the entitlement of the appellant, a registered firm engaged in the business of processing and selling milk under the brand name 'Doodh Amrut,' to claim investment allowance on machinery and plant used in the business. The appellant contended that their business activity amounted to the production or manufacture of an article or thing, making them eligible for the investment allowance. The Tribunal examined various decisions cited by both parties, emphasizing the distinction between processing and manufacturing as per legal precedents. Ultimately, the Tribunal concluded that the appellant's activity of processing milk did not meet the criteria for manufacturing or production of an article or thing, thereby rejecting the appellant's claim for investment allowance. Merger of the assessment order in the order of the appellate authority: The issue of the merger of the assessment order in the order of the appellate authority was raised during the proceedings. The appellant argued that since the assessment order had merged with the order of the Commissioner (Appeals), the Commissioner had no jurisdiction under section 263. However, the Tribunal clarified that the assessment order had not merged with the order of the Commissioner (Appeals) at the time the Commissioner passed the order under section 263. The Tribunal highlighted that the ITO could have requested for enhancement during the pending appeal, but the choice of remedy did not render the Commissioner's actions under section 263 illegal. Consequently, the Tribunal dismissed the appeal, affirming the validity of the Commissioner's order under section 263.
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