1989 (6) TMI 83 - AT - Income Tax

Summary

Issues:
1. Investment allowance claim for manufacturing activity
2. Computation of live stock loss
3. Classification as an industrial company

Analysis:

Issue 1: Investment allowance claim for manufacturing activity
The appeal concerns the denial of investment allowance by the ITO due to the company not being considered to be engaged in manufacturing activity. The CIT(A) upheld this decision, citing that pasteurization of milk does not constitute manufacturing as there is no change in the end product. However, the Tribunal found merit in the claim, stating that the process undertaken by the company transforms raw material into a commercial commodity with a separate identity, making it eligible for investment allowance under s. 32A of the IT Act. The Tribunal highlighted the broad definition of "process" and "manufacture," emphasizing that as long as the end product is a commercial commodity distinct from the raw material, it qualifies for the investment allowance. The Tribunal referenced relevant case laws supporting this interpretation and directed the ITO to allow the claim if all other conditions are met.

Issue 2: Computation of live stock loss
The Tribunal addressed the discrepancy in the computation of live stock loss by the ITO, directing the computation to be done in line with previous years' methodology, as decided in earlier Tribunal orders. The Tribunal instructed the ITO to make necessary adjustments without altering the basic accounting method followed by the assessee, thus favoring the assessee's position in this regard.

Issue 3: Classification as an industrial company
The Tribunal set aside the CIT(A)'s decision on the classification of the company as an industrial company and directed the ITO to reconsider this classification in light of the Tribunal's ruling on the investment allowance claim. The matter was remanded to the assessing ITO for a fresh decision, with instructions to provide the assessee with a full opportunity to substantiate its claim for the status of an industrial company. The Tribunal treated the appeal as allowed for statistical purposes.

In conclusion, the Tribunal ruled in favor of the assessee regarding the investment allowance claim, live stock loss computation, and the classification as an industrial company, providing detailed reasoning and legal interpretations to support its decision.