TMI Blog1986 (6) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, there was a prima facie reason to believe that the orders of the ITO for both the years were erroneous and prejudicial to the interests of the revenue inasmuch as he had allowed the claim for investment allowance under section 32A of the Act to which the assessee-company was not entitled. Accordingly, a notice under section 263 was issued asking the assessee-company to show cause as to why the assessments should not be revised under section 263. 2. Rejecting the submissions made by the assessee, the learned Commissioner held the assessee as not entitled to investment allowance under section 32A as follows : "5. I have considered these submissions but I am unable to agree with the same. The assessee-company in its reply dated 30-12-1980 to the ITO in support of its claim for grant of investment allowance had contended that during the concerned assessment year the machineries were of the value less than Rs. 10 lakhs and, therefore, the company would be falling within the definition of small-scale industry and hence entitled to claim investment allowance. On a scrutiny of the balance sheet of the company for 1980-81 also it is seen that the value of the machinery is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, the same can be found in the more recent decision of the Bombay High Court in the case of CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696." 3. The assessee is aggrieved and has come up in appeal before us. Shri S.P. Mehta, learned advocate appeared for the assessee and Shri D.A. Kamat, the learned departmental representative, appeared for the revenue. Shri S.P. Mehta reiterated the same submissions as made before the Commissioner. According to him, section 32A(2)(b)(ii) as inserted by the Finance Act, 1977 is an enabling provision to extend the scope of investment allowance so as to entitle small-scale industrial undertakings to wider concessions and without restrictions. Small-scale industrial undertakings are singled out for special treatment so that they can enjoy the benefit under section 32A even if they manufacture or produce articles listed in the Eleventh Schedule. This is evident from the provisions of sub-section (2A) of section 32A and also the Finance Bill (No. 2), 1977. Shri S.P. Mehta also drew our attention to the memo explaining provisions in Finance (No. 2) Bill, 1977 to support his claim that the amendment was introduced to extend the scope of the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of Rs. 38,448 and Rs. 30,552 for the assessment years 1978-79 and 1980-81, respectively, under section 32A which was duly allowed by the ITO. The Commissioner, however, opined that construction work of jetties, flyovers and bridges does not qualify for investment allowance under sub-clause (ii) of sub-section (2)(b) of section 32A as such business does not come within the said sub-clause. Since the assessee was a small-scale industrial undertaking with a capital of less than Rs. 10 lakhs, the Commissioner held that sub-clause (iii) can also not be applicable to it. He, accordingly, directed the ITO to withdraw the investment allowance already granted for both the above years. 6. Shri S.P. Mehta, the learned counsel appearing before us, did not dispute the finding of the Commissioner regarding the capital of the assessee and the nature of the business carried on by it. The main emphasis has been that sub-clause (iii) of the above section has been inserted for the benefit of small-scale industrial undertakings and not to restrict the concession to such undertakings. This contention of the learned counsel appears to be well founded. Section 32A was inserted by the Finance Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production of any article or thing specified in the said list". It is also seen that the Finance (No. 2) Bill, 1977 proposed amendment of section 32A as follows: "9. Amendment of section 32A.---In section 32A of the Income-tax Act, with effect from the 1st day of April, 1978,--- (a) in sub-section (2),--- (i) in clause (b), for sub-clauses (ii) and (iii), the following sub-clause shall be substituted, namely:--- '(ii) for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule: Provided that in relation to any new machinery or plant installed before the 1st day of July, 1977, in a small-scale industrial undertaking, this sub-clause shall have effect as if the words "not being an article or thing specified in the list in the Eleventh Schedule" had been omitted ;' ;" 7. On careful reading of the speech of the Finance Minister, the Finance Bill and the Explanatory Note issued in this behalf, it is perfectly clear that the amendment was introduced to encourage and assist the small-scale sector in keeping with the Government's overall policy. It is intended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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