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TMI Blog2012 (6) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the assessee, who undertook job work by rendering services to others instead of actually manufacturing or producing any article or thing, was entitled to investment allowance under section 32A of the Income-tax Act ?" 2. The two questions can be appreciated by making a brief reference to the factual background of the matter. The respondent (assessee) is in the busi- ness of manufacturing forging products. They also undertake job work from Republic Forge and other companies. For the assessment years 1983-84 and 1984-85 in their returns of income, they claimed investment allowance under section 32A of the Act. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee : 4. Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words 'twenty-five per cent.', the words 'twenty per cent.' had been substituted : 5. Provided further that no deduction shall be allowed under this section in respect of- (a) any ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or thing ; or (iii) in any other industrial undertaking 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 nothing contained in clauses (a) and (b) shall apply in relation to,- (i) a new ship or new aircraft acquired, or (ii) any new machinery or plant installed, after the 31st day of March, 1987, but before the 1st day of April, 1988, unless such ship or aircraft is acquired or such machinery or plant is installed in the circumstances specified in clause (a) of sub-section (8B) and the assessee furnishes evidence to the satisfaction of the Assessing Officer as specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (2). In so far as a small scale industrial undertaking is concerned, machinery or plant ought to have been used for the purpose of business or manufacture or production. The same is the case with any other industrial undertaking. If the legislation intended to deny investment allowance in respect of machinery or plant used for the job work by an assessee the same would have found place in special proviso to sub-section (1) of sec- tion 32A of the Act. Though Parliament took abundant care to exclude the four aspects in respect of which investment allowance cannot be claimed, the job work is absent therein. Therefore, the plea cannot be accepted. 7. The above view is also supported by the decision of the Madras High Court in Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture'. When the assessee subjects grey cloth to the process of dyeing and printing, it makes or produces distinct article having a distinct use as distinguished from the grey cloth though grey cloth is still subsisting. As a result of the process to which grey cloth is subjected to, there is transformation of grey cloth into a new commodity commercially known as a distinct and separate commodity having its own character, use and name. Transformation of grey cloth to the extent that it becomes a commer- ially different commodity is sufficient to hold that there is manufacture or production of article within the meaning of clause (iii) of sub-section (4) of section 80J of the Act. In our opinion, applying the test laid down by the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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