TMI Blog1998 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... e of taxation accorded to industrial companies under the Finance (No. 2) Act, 1977. It also claims investment allowance under section 32A of the Income-tax Act, 1961, on the ground that it was an industrial undertaking engaged in the manufacture of articles. That claim though negatived by the assessing authority has been upheld by the Tribunal. The Revenue has therefore, come up before this court with this reference. The question referred to us is as to whether the assessee should be treated as an industrial company for the purpose of assessment at a lower rate of tax and also for grant of investment allowance under section 32A of the Act. In so far as the first part of this question is concerned. The Explanation to section 2(7)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Explanation to section 2(7)(c) of the Finance (No. 2) Act, 1977, which lays down the test for determining the claim of a company for being regarded as an industrial company. It is in the interest of justice that the assessee as also the Revenue should have an opportunity to address themselves to that question before the assessing authority, paying due attention to the requirements of the Explanation to section 2(7)(c) of the Finance (No, 2) Act, 1977. As regards the latter part of the question viz., the grant of investment allowance claimed by the assessee under section 32A(2) of the Act, it must be held that if the assessee is able to demonstrate that the machinery or plant in respect of which the allowance is claimed are used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort wherein the apex court has held : "We are, there fore, of the opinion that sub-clause (iii) of clause (b) of sub-section (2) of section 32A does not comprehend within its ambit construction of a dam, a bridge, a building, a road, a canal and other similar constructions." Had the assessee made a claim for investment allowance on the building constructed by the assessee, the assessee clearly would be out of court. The claim, however, was not for the building constructed, but was in respect of machinery or plant, used for the manufacture of windows, gates, doors, etc. The amount of the allowance claimed is but a small fraction of the total income of the assessee, which income itself was derived from a turnover which was several times the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarded as an industrial undertaking in so far as the activity of manufacturing is concerned. A composite undertaking which is an industrial undertaking in one part and non-industrial undertaking in another part does not by that reason cease to capable of being regarded as an industrial undertaking to the limited extent of its claim for the benefits under the Act, in relation to the activity which can properly be regarded as a manufacturing activity carried on by such an undertaking. Section 32A of the Act which confers the benefit of investment allowance is a provision, which is obviously meant to encourage industries to instal new plant and machinery where such plant and machinery is utilised for the manufacture or process of articles a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's claim. The Assessing Officer shall give due opportunity to the assessee and after scrutinising the materials produced, if he is satisfied that the machinery or plant is in fact used in the manufacture of articles or things and that the assessee is an industrial undertaking he shall grant the benefit to the assessee in accordance with the statutory provisions. The questions referred to us, therefore, are returned unanswered as the answer to the questions will ultimately depend upon what the Assessing Officer will find, after he complies with the terms of this order. The order of the Tribunal as also of the appellate authority are set aside so as to enable the Assessing Officer to carry out the terms of this order. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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