1987 (2) TMI 126 - AT - Income Tax

Summary

Issues:
1. Entitlement to investment allowance for milling paddy for others.
2. Necessity of owning goods manufactured for claiming investment allowance under section 32A.

Analysis:
1. The case involved a firm engaged in milling paddy for hire, claiming investment allowance for plant and machinery installed. The Income-tax Officer disallowed the claim, stating that the process did not amount to manufacturing or production of a new article. The firm argued citing legal precedents that milling involved a manufacturing process. The CIT (A) partially allowed the claim, directing verification of details for granting investment allowance. The department appealed against this decision, contending that the firm was not engaged in manufacturing but providing milling services.

2. The Tribunal analyzed the legal provisions under section 32A regarding investment allowance on machinery and plant. It was established that ownership of the manufactured goods is not a prerequisite for claiming the allowance. The Tribunal referenced a previous case where it was held that paddy and rice are distinct commodities, and processing paddy into rice constitutes manufacturing. The Tribunal also referred to a Supreme Court case outlining tests for determining a manufacturing process, emphasizing the need for distinct end products. The Tribunal concluded that the firm, by processing paddy into rice using machinery, qualified for investment allowance, dismissing the appeal as lacking merit.

In conclusion, the Tribunal upheld the firm's entitlement to investment allowance for milling paddy into rice for others, emphasizing that ownership of the goods manufactured is not a requirement for claiming the allowance under section 32A. The judgment highlighted the distinction between paddy and rice as separate commodities and affirmed that processing paddy into rice constitutes manufacturing, making the firm eligible for the investment allowance.