TMI Blog2000 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the claim on the ground that the assessee had merely used the air compressor for treatment of metal and the assessee had not produced or manufactured any thing or article as required under section 32A of the Act and hence the assessee is not entitled to claim investment allowance in the computation of its income. The Commissioner of Income-tax (Appeals), on appeal, on the basis of the certificates issued by the technical persons found that sand blasting is a part of the manufacturing process and it is a must for industrial painting and for surface treatment and he held that the assessee is entitled to investment allowance in respect of the machinery used for that purpose. The Income-tax Appellate Tribunal, on appeal preferred by the Department relying upon the affidavit filed by one of the partners of the assessee-firm and also the certificates issued by the technical personnel held that sand blasting equipment is used in specialised type of painting process and the equipment is utilised by the assessee in the process by manufacture by two small scale industries, viz., Hydraulic Equipments, Ambattur, Madras and J. H. Industries Private Limited, Madras. The Tribunal, on the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308. Learned senior counsel also relied upon the decision of the Karnataka High Court in Hind Nippon Rural Industries Pvt. Ltd. (No. 2) v. CIT [1993] 201 ITR 588 and submitted that chipping and sizing of granite do not amount to manufacture or production of goods and the assessee was not involved in the manufacture of production of goods. He also brought to our attention the memorandum explaining the provisions of the Finance Bill, 1976, explaining the reasons for the introduction of investment allowance and submitted that the assessee should install a plant for the purpose of manufacture or production of articles or things and since air compressor was not utilised for the manufacture or production of articles or things, the assessee is not entitled to claim investment allowance. Learned senior counsel also referred to the decision of the Supreme Court in the case of CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 and submitted that all the requirements of section 32A for the Act are to be fully satisfied before the assessee could claim investment allowance. Mr. G. Ashokpathy, learned counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on by the assessee, and 3. The machinery must come under any of the categories specified in sub-section (2) of section 32A." Here, there is no dispute that the air compressor is owned by the assessee. There is also no dispute that the air compressor is used wholly for the purpose of the business of the assessee and the article manufactured is not one of the items which come under the enumerated categories found in section 32A of the Act which made it ineligible for the assessee to claim investment allowance. The object of section 32A of the Act is to facilitate investment in priority industries and as observed by the Karnataka High Court in CIT v. Mahant Oil Industries Pvt. Ltd. [1992] 193 ITR 620, it should receive a liberal construction to effectuate the object of the section and there are no reasons to restrict the meaning of the terms found in section 32A of the Act. The Supreme Court in CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308 held that where the business of the assessee consists of hiring out machinery and where the income derived by the assessee from the hiring of such machinery is business income of the assessee, it must be considered that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or production of the final article as well. The machinery in question might have been used in the intermediary stage of production of articles, yet where the part played by a machinery is essential in the continuous process of manufacture or production of article we are of the view that the investment allowance would be available to such machinery involved in the intermediary process. If the view of learned senior counsel for the Revenue is accepted, it will lead to a situation that many of the machineries employed in intermediary stages in the manufacture or production of articles or things may become ineligible to claim investment allowance and the said construction would defeat the very object of introduction of section 32A of the Act. We hold that so long as the machinery is used for the purpose of manufacture of and production of articles or things, at any stage, either intermediary or final, if all the requirements under section 32A are satisfied, the assessee would be entitled to claim investment allowance. We hold that the case of the assessee stands on a better footing than the case before the Supreme Court in CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308 where mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 654, would apply to the facts of the case and sand blasting process was found to be an essential part in the manufacture of articles. Learned senior counsel for the Revenue also referred to the memorandum explaining the provisions of the Finance Bill, 1976, and we have carefully gone through the same. As already held by us, the provisions of section 32A of the Act have to be interpreted in a beneficial manner keeping in view the object of the provision that it was introduced to promote industrialisation in this country. In so far as the decision of the Supreme Court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412, relied upon by learned senior counsel for the Revenue is concerned, the Supreme Court in that case examined the scope of expression, "articles or things" in section 32A of the Act. There is no dispute that ultimate product that comes out of the manufacture or production should be an article or thing. But, the issue focussed here is different and the decision of the Supreme Court in N. C. Budharaja's case [1993] 204 ITR 412 on which heavy reliance was placed by learned senior counsel for the Revenue does not help the Department in any way. We hold that all t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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