1984 (6) TMI 125 - AT - Income Tax

Summary

Issues:
- Claim of relief under section 32A by the assessee.
- Determination of whether the assessee qualifies as an industrial undertaking.
- Interpretation of whether the manufacturing process is involved in the production of rice.
- Application of relevant legal precedents to the case.

Analysis:
The appeal before the Appellate Tribunal ITAT Hyderabad-C revolved around the claim of relief under section 32A by the assessee, who was engaged in the business of manufacturing rice. The Income Tax Officer (ITO) had initially rejected the claim, citing the treatment of a similar rice mill as a non-manufacturing concern by higher authorities. The assessee then appealed to the Assistant Commissioner of Income Tax (AAC), arguing that they were indeed a manufacturing concern and thus eligible for the deduction under section 32A.

During the appeal before the AAC, it was contended that the process of crushing paddy and converting it into rice constituted a manufacturing process, as the finished product differed from the raw material. The AAC, drawing on a previous Tribunal order, directed the ITO to treat the assessee as an industrial undertaking and allow relief under section 32A. Subsequently, the Department appealed the AAC's decision, claiming that a rice mill did not engage in manufacturing goods and that the relief under section 32A was wrongly granted.

Upon hearing both parties, the Tribunal considered whether the production of rice from paddy qualified as an industrial undertaking involving a manufacturing process. Citing legal precedents, including a decision by the Bangalore Bench of the Tribunal and a judgment of the Supreme Court, the Tribunal concluded that milling paddy into rice constituted a manufacturing process. Therefore, the assessee was deemed a manufacturing concern entitled to relief under section 32A of the Income Tax Act. Consequently, the Tribunal upheld the AAC's decision and directed the ITO to revise the assessment in favor of the assessee.

In conclusion, the appeal filed by the Department was dismissed, affirming the assessee's eligibility for relief under section 32A as a manufacturing concern engaged in the production of rice.