TMI Blog2013 (10) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, it cannot be said that the assessee was not in the business of manufacture or production of articles or things – Decided against the Revenue. - - - - - Dated:- 13-12-2011 - RAO V. V. S. AND RAO NALLA B. N., JJ V. V. S. Rao J.- The respondent (the assessee) is engaged in the business of processing milk and manufacturing by-products like ghee, flavoured milk, butter milk, rose milk and kova (hereafter referred to as milk products). In their return of income for the assessment year 1983-84, they claimed investment allowance of Rs. 29,957 on plant and machinery installed during the year relevant to the assessment year. The Income-tax Officer, Visakhapatnam, while assessing the income under section 143(3) of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent allowance on plant and machinery used for manufacturing by-products of the milk. The junior counsel for the Department, however, submits that the assessee is not involved in the process of manufacturing, and therefore, they are not entitled for investment allowance under section 32A of the Act. He relies on Sacs Eagles Chicory v. CIT [2002] 255 ITR 178 (SC) ; CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC) and CIT v. Gem India Manufacturing Co. [2001] 249 ITR 307 (SC). The counsel for the assessee submits that the process of making milk products involve heating, boiling refrigeration, filtration, etc., facilitated by specially designed machinery and, therefore, there is process of manufacturing undertaken by the assessee. He wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant installed after the 31st day of March, 1976 (i) for the purposes of business of generation or distribution of electricity or any other form of power ; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article 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 : (proviso and the Explanation are omitted herein as not relevant)." A plain reading of sub-section (2) of section 32A of the Act would sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of manufacturing or the business of production of articles or things ? In A. Hajee Abdul Shukoor and Co., the petitioner was in the business of tanned and untanned hides and skins purchased from outside State of Madras, tanning them in the said State and selling the tanned hides and skins. They were assessed to sales tax under the Madras General Sales Tax Act, 1939, and rule 16 of the relevant Rules. The petitioner challenged rule 16 as violating article 304 of the Constitution of India. It was, inter alia, contended that when the dealer himself purchased raw hides and skins, the levy of 2 per cent. tax is discriminatory. The plea was that the relevant provisions create discrimination between the case of a local merchant sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt observations are as follow : Coming now to the tests laid down by this court the position may be summarised as follows : 1. That it must be proved that a certain commodity was produced. 2. That the process of production must involve either labour or machinery. 3. That the end product which comes into existence after the manufacturing process is complete, should have a different name and should be put to a different use. In other words, the commodity should be so transformed so as to lose its original character. In the instant case, what happened was that wheat was transformed, by the manufacturing process which involved both labour and machinery, into flour. The commodity before manufacture was wheat which could not be consumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, the Commissioner of Income-tax recorded a finding that the assessee claimed investment allowance on plant and machinery. There was no dispute that the assessee was engaged in the business of making products or things for which the raw material was milk. There is also no dispute that the assessee was employing machinery for making milk products like ghee, flavoured milk, butter milk, rose milk and kova. When once the milk was subjected to the process, in their factory, new products emerge which are altogether different from milk itself. Therefore, it cannot be said that the assessee was not in the business of manufacture or production of articles or things. The Reference, therefore, has to be answered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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