1986 (2) TMI 101 - AT - Income Tax

Summary

Issues:
- Entitlement to investment allowance under section 32A of the Income-tax Act, 1961 for assessment years 1979-80 and 1980-81.
- Whether the assessee, engaged in running an automobile workshop, is involved in the manufacture or production of new articles or things to qualify for investment allowance.

Analysis:
1. The appeals before the Appellate Tribunal ITAT Cochin were against the Commissioner's orders under section 263 of the Income-tax Act, 1961, regarding the entitlement to investment allowance for the assessment years 1979-80 and 1980-81. The Commissioner revised the assessment orders, stating that the assessee, an automobile workshop, did not qualify for investment allowance as they were not engaged in manufacturing or production activities. The Commissioner directed the withdrawal of the investment allowance previously granted.

2. The assessee argued that they produced new articles by reboring engines and conducting various operations in their workshop, making them eligible for investment allowance. The counsel cited cases like CIT v. Perfect Liners and Singh Engg. Works (P.) Ltd. to support their claim. However, the departmental representative contended that no new articles were manufactured by the assessee, emphasizing that they only conducted repair work, citing CIT v. N.U.C. (P.) Ltd.

3. The Tribunal analyzed the submissions and concluded that the assessee, despite processing engines to render them usable, did not manufacture or produce new articles. Referring to the decision in CIT v. Hindusthan Metal Refining Works (P.) Ltd., the Tribunal highlighted that manufacturing or production involves creating new goods or articles, which the assessee did not do. The Tribunal also referenced a case involving Popular Garage, where similar processing activities were not considered as manufacturing or production.

4. The Tribunal distinguished the cases cited by the assessee's counsel, noting that they involved different business activities that included purchasing, manufacturing, or selling items, unlike the assessee in question. The Tribunal upheld the Commissioner's orders under section 263, emphasizing that the assessee's activities did not qualify for investment allowance as they did not involve manufacturing or production of new articles.

5. Consequently, the appeals were dismissed, affirming the decision that the assessee was not entitled to investment allowance for the assessment years 1979-80 and 1980-81 due to the nature of their activities in the automobile workshop.