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TMI Blog1984 (9) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, the ITO issued notice on the assessee under section 148/147 of the Act to show cause that why depreciation allowance on rigs and compressors should not be restricted to 10 per cent, while investment allowance originally granted should not be withdrawn. The assessee offered an explanation stating therein that the assessee is entitled to depreciation and investment allowance and the same is to be allowed. Reliance was placed on the decision of the Tribunal dated 21-7-1981 in IT Appeal No. 2068 (Mad.) of 1980 and, therefore, the depreciation allowance is to be allowed at 30 per cent and also further investment allowance. The ITO did not accept the explanation of the assessee on the ground that the department has not accepted the decision of the Tribunal and reference is there in the High Court and, therefore, he allowed depreciation at 10 per cent. He also disallowed the claim of the assessee for investment allowance on the ground that this allowance is admissible on the machineries specified in sub-section (2) of section 32A and since the sinking of borewells could not be connected with the business of construction, manufacture or production of any article or thing, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, for the purpose of deduction under section 32A, the drilling rigs and compressors should remain as lorry. Therefore, we find force in the contention of the learned departmental representative that the drilling rigs and compressors for the purpose of depreciation and deduction under section 32A are to be taken as lorry and relief under section 32A is to be determined and allowed, accordingly, and as such the order of the Tribunal for the purpose of relief under section 32A should not be followed, being distinguishable. However, the learned counsel for the assessee has not convinced us in rebutting the contention of the learned departmental representative referred to above as he merely relied on the decision of the Tribunal dated 21-7-1981 in IT Appeal No. 269 (Mad.) of 1980, where the Tribunal allowed section 32A relief to the assessee on the ground that drilling borewells fell within the terms of this section as the assessee itself has created a contradiction or anomaly in claiming depreciation on the drilling rigs and compressors on the basis of lorry. The lorry under the Motor Vehicles Act, 1939, in the common use or as popularly understood in India, is for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd material used for manufacture of articles or goods, since it postulates direct involvement in manufacture, production or processing of goods. Hence, the term 'engaged in manufacture, production or processing of goods' is not synonymous with that of the term 'engaged in business of manufacture, production or processing of goods'. Therefore, it will not include the claim where the assessee gets the goods manufactured, processed or produced by any outside agency or manufactures or processes for any outside agency on contract basis or charges for work on its part. In other words, the assessee to be an industrial undertaking, it, he or she should be owner of the machinery, plant, raw material used in manufacture, production or processing of goods or articles. Moreover, the assessee should also deal in such articles or goods manufactured or produced. Therefore, on these reasons, we hold that the case relied on by the Commissioner (Appeals), decided by the Tribunal referred to above, is distinguishable and the departmental representative has distinguished it and, therefore, we are unable to follow it in the case of the assessee. Accordingly, we further hold that the assessee is not ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981]. 3. The revenue's second contention is that the assessee is not entitled to the benefit of investment allowance which is admissible only in respect of machineries specified in section 32A(2) and not for any other machineries. The ITO had withdrawn the investment allowance in the reassessment under present appeal on the ground that 'sinking of borewells could not be equated with the business of construction, manufacture or production of any article or thing', stating that the Tribunal's decision on this point in IT Appeal No. 2068 (Mad.) of 1980 dated 21-7-1981 has not been accepted by the department. Before the Commissioner (Appeals) in appeal, the assessee's ground was that it is a small-scale industrial undertaking only and it was engaged in the production of a thing under section 32A(2)(b). The Commissioner (Appeals) in appeal held that the assessee is entitled to investment allowance, following the decision of the Tribunal dated 21-7-1981 in IT Appeal No. 2068 (Mad.) of 1980. The department's submissions before us against the Commissioner (Appeals)'s order are twofold viz., (i) that the Tribunal's decision has not been accepted and that the assessee is not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5(1)(xxxii) of the Wealth-tax Act, 1957, containing the phrase 'Manufacturing or processing of goods'. It may be noted that in section 32A(2)(b) (with which we are concerned in the present appeal), the term 'industrial undertaking' (both small-scale and non-small-scale) takes into its ambit 'production of any article or thing', the term not being separately defined. Thus, in the present case, we are concerned with the production of any article or thing, and not the manufacturing or processing of goods. I am, hence, of the view, with great respect, that K. Lakshmi's case has no application to the present case. Following the Tribunal's order in IT Appeal No. 2068 (Mad.) of 1980, I should hold that the assessee is entitled to investment allowance in the present case. 4. The further interesting point raised by the department for consideration is that rig and compressor fitted on the chassis being treated as a lorry for the purpose of depreciation, it should be treated as a 'road transport vehicle' and, hence, the assessee is not entitled to investment allowance in view of the prohibition regarding road transport vehicle in the provisions of section 32A(2)(b). I am unable to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial rate of 30 per cent prescribed for motor lorries on the drilling rigs and compressors used in the assessee's business of sinking borewells), is also entitled to investment allowance under section 32A(2)(b) in respect of the above items of machinery ?" THIRD MEMBER ORDER Per Dr. V. Balasubramanian, Vice President -- The assessee is a firm of five partners engaged in the business of drilling borewells. Amongst the assets used for his business and in respect of which depreciation and other allowances were claimed, were two items : compressors with the written down value as on 1-4-1979 of Rs. 1,09,272 and rigs with the written down value on 1-4-1979 of Rs. 1,40,020. In respect of the first item, addition to the extent of Rs. 2,69,789 was made, making a total of Rs. 3,03,249. Depreciation was granted on the above item at the rates of 10 and 20 per cent, respectively, by the ITO. A claim for investment allowance in respect of the compressors and rigs was, however, not entertained, by the ITO. On appeal, the assessee claimed depreciation in respect of these items at the same rate as that granted to motor vehicles, lorries, etc. On appeal, this seems to have been granted. On the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grant of investment allowance to the assessee engaged in his particular line of business. The grant of investment allowance, therefore, by itself is not in question. What is in dispute is the nature of the asset for which the allowance is claimed. The two learned members have differed on this rather than as to the grant of the allowance itself. 5. In my view, apparently, there is no conflict between the views of the two different members nor between the view of the department and the assessee as to the grant of investment allowance on particular items. That investment allowance cannot be granted to motor lorries is clear. It is equally clear that the allowance should be granted to other items of machinery. What seems to have been assumed is that the rigs and compressors in question. In the present case, should definitely be brought within the straitjacket of the two categories mentioned : motor lorries and others. I do not see why this should be so. Neither the order of the ITO, the Commissioner (Appeals) nor the differing orders of the two learned Members bring out the exact description of the assets in question. From the description given and the gaps filled in by the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted does not arise. With regard to the grant of investment allowance, however, which is disputed before the Tribunal, it could certainly be found out as to how much, out of the figures of Rs. 3,79,062 and Rs. 1,40,020, pertains to the lorry part of the item and how much by way of balance pertains to the rig and compressor part. On the latter part, investment allowance should be allowed, whereas on the former it should not be allowed. 7. When the nature of the asset is thus properly analysed, there seems to be really no difference of opinion between the two Members. It is not necessary to treat the combined item of lorries and rigs as a single one which can be fitted into one of the stated items--motor lorry and others. Since all the three items are separately available in the market and could be used and perhaps the assessee himself has acquired them separately, I would direct that the actual value of each of these items be separately worked out and investment allowance be allowed for the part representing rigs and compressors. 8. The question referred to me is answered as above. The matter will now go back to the Bench which originally heard the appeal for proper disposal ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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