1982 (8) TMI 120 - AT - Income Tax

Summary

Issues:
- Dispute over investment allowance for machinery used in construction of a dam
- Interpretation of the term "industrial undertaking" under section 32A of the Income-tax Act, 1961
- Relevance of the word "construction" in determining eligibility for investment allowance

Detailed Analysis:
The judgment involves an appeal by Progressive Engineering Co. regarding the investment allowance for machinery used in constructing a dam. The dispute centers on whether the assessee qualifies as an "industrial undertaking" under section 32A of the Income-tax Act, 1961. The assessee claimed Rs. 5,02,334 as investment allowance, which the ITO initially denied, stating that the assessee was not engaged in manufacturing. The Commissioner (Appeals) also upheld this decision, questioning whether a firm of contractors could be considered an industrial undertaking. The assessee cited precedents from the Orissa High Court and the Bombay High Court to support their case. The machinery used by the assessee included compressors, tippers, crushers, and other equipment for dam construction.

The Tribunal analyzed the nature of the assessee's work, which involved significant machinery worth Rs. 60,00,000 for tasks like earth moving and concrete preparation. The Tribunal examined the definition of "industrial undertaking" and the requirement that machinery should be used for construction, manufacture, or production of articles or things. The dispute revolved around whether construction alone qualifies for investment allowance or if it should be construction of an article or thing. The Tribunal disagreed with the revenue's interpretation, emphasizing that construction of a dam should be considered construction of a thing. Precedents from the Orissa High Court, Bombay High Court, and Delhi High Court were cited to support the assessee's eligibility for investment allowance based on similar activities being deemed industrial undertakings.

The Tribunal concluded that the assessee's activity constituted an industrial undertaking engaged in the business of construction or manufacture of articles or things. Therefore, the appeal was allowed, directing the ITO to reconsider the claim for investment allowance based on the assessee's eligibility as an industrial undertaking. The judgment highlights the broader interpretation of the term "industrial undertaking" and the significance of the word "construction" in determining eligibility for investment allowance under section 32A of the Income-tax Act, 1961.