TMI Blog2005 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the learned Income-tax Appellate Tribunal was justified in upholding the findings of the Commissioner of Income-tax (Appeals) directing allowance of the assessee's claim for investment allowance under section 32A of the Income-tax Act, 1961 at Rs. 3,79,285 on new machineries installed in the branch set for doing printing job on tin plates." The assessment year in question is 1989-90. The assessee-respondent feeling aggrieved by an order of assessment dated March 15, 1990, by means of which the plea of the assessee that he was entitled to the investment allowance to the tune of Rs. 3,79,285.40, was rejected by the Assessing Officer under section 143(3) of the Act, filed an appeal and the Commissioner of Income-tax (Appeals) vide his order dated April 30, 1992, allowed the said claim upsetting the findings recorded by the Assessing Officer and the appeal preferred by the Revenue before the Income-tax Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals) has been dismissed on May 20, 1999. Feeling aggrieved by the aforesaid orders, the present appeal has been filed by the Revenue. The facts relevant for the present controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and machinery to process such material, was engaged in the production of a thing. This view was upheld by the Appellate Tribunal also. The relevant extract of section 32A is being quoted below: "32A.(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous 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: Provided that.... (2) The ship or aircraft or machinery or plant referred to in subsection (1) shall be the following, namely: (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before us for supporting the claim of the assessee, was a case with respect to investment allowance in regard to the colour photo developing machine which accepted negatives, cut paper fed it into different sizes and developed, printed and delivered the final product in different colourful sizes and designs. The Tribunal held as under: "Investment allowance is available to a small-scale industrial undertaking established for manufacture or production of any article or thing. The assessee, being registered as a small-scale industry with the State Government, was printing and developing various articles from the negatives inserted in the imported machine. The final product was something different from the negative or the white paper which was inserted in the machine, and it was coming in different sizes. Therefore, if the operation of the machine was taken into consideration along with the final product, it would be clear that the assessee was manufacturing an article with the machine." The Tribunal thus allowed the claim of investment allowance under section 32A. In the case of Asst. CIT v. Soni Photo Films P. Ltd. [2000] 245 ITR (AT) 11 (Delhi) [SB], the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t amount to either manufacture or production of an article or a thing." Further reliance has been placed on the following observations: "It is not necessary that the original article or material should have lost its identity completely. All that is important is whether what is emerged as a result of operations is a different commercial commodity having its own name, identity, character or end-use. In the instant case, applying the test, the negative vacant film roll fitted or kept in or fitted into the camera is a quite different and distinct article than the photograph which can be taken on the negative film. Nobody calls the photo as equal to a negative film. The negative film loses its identity completely and the photo is quite a different commercial commodity having its own identity, character and end-use. Therefore, what is involved while taking a photograph by a photographer is manufacture." The case of Asst. CIT v. Kohli Bros. Colour Lab. P. Ltd. decided by the Income-tax Appellate Tribunal, Allahabad Bench "A", Allahabad for the assessment year 1986-87 on March 17, 1999, is also placed before us, where it was the case of the Revenue that photographic apparatus and goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessing system, the inputs which are fed in are entirely different, in a different form with different indicators. As against that, the end-product, viz., balance-sheets, various accounts, statements, analysis, etc. which emerge by way of print outs are distinct and different from the inputs, inasmuch as what comes out is having different connotation and use. Thus, the activity of data processing through the use of computers is one which would amount to business of manufacture or production of articles or things and the unit which undertakes such computer services for other concerns would be an industrial undertaking." The court thus concluded that the assessee-company which provides computer services to other concerns was an industrial undertaking engaged in the business of manufacture or production and was thus eligible for investment allowance under section 32A of the Act on the cost of computer. The apex court in the case of CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308 ; [1998] ; 3 SCC 605, had an occasion to consider the meaning, import and scope of section 32A. In the said case the claim of investment allowance was made by the assessees, which were financial companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. 23.1. It is stated that the new scheme of investment allowance is broadly on the lines of development rebate scheme that was discontinued earlier. Whereas development rebate was allowed at varying rates, investment allowance will be admissible at the uniform rate of 25 per cent. only. Describing the provisions of section 32A(2), the circular states that new ships and new aircraft acquired after March 31, 1976, by the taxpayers engaged in the business of operation of ships or aircraft will be eligible. It says: 'It should be noted that new ships and aircraft will qualify for investment allowance only in the hands of taxpayers carrying on the business of operating ships or aircrafts and the allowance will not be available in respect of ships or aircraft acquired by other taxpayers.' In respect of new machinery or plant installed after March 31, 1976, however, the circular does not prescribe any such condition of the assessee himself carrying on the business of manufacturing. The circular thus clearly brings out the difference between section 32A(2)(a) and section 32A(2)(b)" The Allahabad High Court in the case of Singh Engineering Works P. Ltd. v. CIT [1979] 119 ITR 891, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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