1998 (6) TMI 113 - AT - Income Tax

Summary

Issues:
- Claim of Investment Allowance on Dumpers
- Claim of deduction under sections 80HH and 80-I of the Income-tax Act

Analysis:

Claim of Investment Allowance on Dumpers:
The case involved a dispute regarding the eligibility of the assessee-company for investment allowance on dumpers. The Assessing Officer had denied the claim, stating that the company was not engaged in industrial activity but rather in heavy construction work. However, the CIT(A) allowed the claim based on previous appellate orders and held that the assessee was entitled to investment allowance as an industrial undertaking. The revenue appealed against this decision, citing a Supreme Court judgment reversing a previous High Court decision supporting the industrial activity classification. The assessee argued that it was engaged in manufacturing activities by excavating and supplying stones, thus qualifying for the investment allowance. The Tribunal analyzed the definition of "manufacture" and concluded that the activities of the assessee did not amount to manufacturing, as there was no transformation of the stones into new, distinct articles. Therefore, the claim for investment allowance on dumpers was disallowed, and the order of the CIT(A) was set aside in favor of the Assessing Officer.

Claim of Deduction under sections 80HH and 80-I:
The dispute also involved the assessee's claim for deductions under sections 80HH and 80-I of the Income-tax Act. The CIT(A) had directed the Assessing Officer to allow these deductions, considering the assessee as an industrial company engaged in manufacturing activities. The revenue argued against this classification, emphasizing that the assessee was not an industrial undertaking based on the Supreme Court judgment and the lack of substantial transformation in the activities. The assessee contended that it was involved in manufacturing by supplying processed stones for construction, thus qualifying for the deductions. The Tribunal, after examining the definition of "manufacture" and relevant case law, concluded that the assessee did not meet the criteria for being considered a manufacturer. Consequently, the claim for deductions under sections 80HH and 80-I was also disallowed, and the order of the CIT(A) was set aside in favor of the Assessing Officer.

In summary, the Tribunal ruled in favor of the revenue, disallowing the claims for investment allowance on dumpers and deductions under sections 80HH and 80-I due to the assessee's activities not meeting the definition of manufacturing as required by the Income-tax Act.