1986 (6) TMI 64 - AT - Income Tax

Summary

Issues:
- Appeal against the order of the Commissioner of Income Tax (CIT) under s. 263.
- Eligibility of the assessee for investment allowance under s. 32A for job work activities.
- Interpretation of "manufacturing" in the context of job work activities.

Analysis:
1. The appeal was filed by the assessee against the CIT's order under s. 263, challenging the denial of investment allowance under s. 32A for job work activities carried out for M/s Mukund Iron and Steel Ltd.

2. The CIT contended that the job work done by the assessee, involving fabrication of engineering goods, grinding, and similar activities, did not qualify as manufacturing under s. 32A. The CIT set aside the ITO's order and directed a reassessment, rejecting the assessee's claim for investment allowance.

3. The assessee argued that their activities were akin to manufacturing, citing the decision of the Madras High Court in Perfect Liners case and various Tribunal decisions supporting their claim for investment allowance under s. 32A. The assessee emphasized that the processed products were new and essential components, justifying their eligibility for the allowance.

4. The departmental representative supported the CIT's decision, relying on the CIT's findings and relevant case laws. However, the ITAT, after considering the arguments and precedents, found merit in the assessee's appeal. The ITAT referenced the Thiagaraja Industries case where similar job work activities were deemed eligible for investment allowance.

5. The ITAT upheld the assessee's contentions, emphasizing that the job work activities qualified as manufacturing, as per the decision of the Special Bench of the Tribunal and the Madras High Court precedent in Perfect Liners. Consequently, the ITAT allowed the appeal, setting aside the CIT's order and restoring that of the ITO.

6. Ultimately, the ITAT ruled in favor of the assessee, recognizing their entitlement to investment allowance under s. 32A for the job work activities performed. The decision was based on the understanding that the processed products constituted new items essential for specific applications, aligning with the definition of manufacturing under the relevant provisions.

7. In conclusion, the ITAT allowed the appeal, thereby overturning the CIT's order and reinstating the ITO's decision to grant the investment allowance to the assessee for the job work activities undertaken.