1992 (9) TMI 139 - AT - Income Tax

Summary

Issues:
- Allowability of investment allowance under section 32A for a civil contractor firm engaged in construction work.
- Interpretation of provisions for small scale industrial undertakings under section 32A(2)(b)(ii) and (iii) of the Act.

Analysis:
The Revenue appealed against the decision of the CIT(A) allowing investment allowance claimed by a civil contractor firm. The firm's claim was rejected by the ITO on the grounds that investment allowance is only admissible to industrial undertakings engaged in manufacturing or production, not construction. The CIT(A) favored the assessee based on precedents where investment allowance was allowed to contractors. The Revenue contended that small scale industrial undertakings engaged in construction are not entitled to investment allowance. The Revenue cited decisions from the Bombay High Court to support their argument that construction companies are not entitled to investment allowance.

The assessee's counsel acknowledged unfavorable decisions but cited cases supporting contractors' entitlement to investment allowance. The Tribunal noted that the decision in favor of the assessee in a previous case did not consider the distinctions between small scale undertakings and other industrial undertakings under section 32A(2)(b). The Tribunal analyzed various decisions and concluded that small scale industrial undertakings engaged in construction are not entitled to investment allowance. The Tribunal differentiated between sub-clauses (ii) and (iii) of section 32A(2)(b) and held that small scale undertakings engaged in construction are not eligible for investment allowance.

In conclusion, the Tribunal held that the assessee, a civil construction work contractor, falls under the category of small scale industrial undertaking engaged in construction only. As per the interpretation of section 32A(2)(b)(ii) and (iii), the Tribunal ruled that such undertakings are not entitled to the benefit of investment allowance. Therefore, the decision of the CIT(A) was reversed, and the Revenue's appeal was allowed.