1991 (9) TMI 125 - AT - Income Tax

Summary

Issues:
- Entitlement to investment allowance for a building contractor under section 32A of the Income-tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi-E concerned the entitlement of a building contractor to investment allowance under section 32A of the Income-tax Act, 1961. The Revenue challenged the direction of the CIT (Appeals) allowing investment allowance to the assessee company for the assessment year 1985-86. The assessing officer had rejected the claim of investment allowance by the assessee, stating that the firm was not a manufacturing concern.

Upon hearing arguments from both the Departmental Representative and the counsel for the assessee, the CIT (Appeals) directed the assessing officer to allow the investment allowance claimed by the assessee. The Departmental Representative contended that buildings are not considered articles or things, thus a building contractor should not be entitled to investment allowance under section 32A. Reference was made to a Tribunal judgment and a High Court decision to support this argument.

The Tribunal considered the arguments presented by both sides. It noted that the High Court had previously ruled on the nature of buildings, emphasizing that buildings are not considered articles or things within the meaning of section 32A. The High Court's interpretation focused on the definition of industrial company and the specific context in which the terms "articles" or "things" were used in the relevant clauses of section 32A(2)(b). The Tribunal highlighted that the words "manufacture" or "production" used in the provision were not suitable for describing the construction of buildings. It further explained that the term "article" or "thing" in the context of section 32A referred only to movable goods, as evidenced by the items listed in the 11th Schedule.

Based on the above analysis, the Tribunal concluded that a building contractor engaged in the business of constructing buildings is not entitled to investment allowance under section 32A of the Income-tax Act, 1961. Consequently, the direction of the CIT (Appeals) allowing the investment allowance was deemed erroneous and was overturned by the Tribunal. As a result, the appeal by the Revenue was allowed.