TMI Blog1985 (5) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... wed for the assessment year 1981-82. The appeal for that year has, therefore, been wrongly filed. Accordingly, IT Appeal No. 38 is dismissed. 3. The learned departmental representative mainly based his arguments on the fact that retreading of tyres is not the same thing as the manufacturing of new tyres. At best, it can be a process of repairing tyres. The assessee does not start with the basic raw materials and manufacture a tyre. He has already got the core, viz., used tyres, and that retreading is done by strapping on the threads. The process was actually one of repair and not manufacture. 3.1 In support, he relied on a decision of the Bombay Bench of the Tribunal in Tyreage (P.) Ltd. v. ITO [1983] 12 Taxman 47. It was held in that case that retreading was not manufacture of tyres but only repair. Reliance was placed on the decision of the Supreme Court in P.C. Cheriyan v. Mst. Barfi Devi AIR 1980 SC 86 where it was held that the broad test for determining whether a process is a manufacturing process is whether it brings out a complete transformation of the old components so as to produce a commercially distinct or different entity or commodity. The Tribunal applied the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also manufactured, while in retreading the process is similar except that the casing is not manufactured but is already there. It is like purchasing various parts of a machine and assembling them into a new article. In such a case there will be no controversy about the production of an article. Similarly, in the case of retreading also no controversy should arise just because the casing is not manufactured. The production of an article did not involve manufacturing of each and every part which goes into the final product. 5.1 Next he referred to certain books on Economics to support the theory that production means creation of utilities that have value. The old casing of a tyre by retreading acquires utility and value is added to it and such addition of value or utility is equal to production. He then referred to printing of books and printing of cloth which are treated as manufacture although the printer does not produce the book or the cloth himself. 5.2 Reference was then made to the decision of the Delhi High Court in the case of Addl. CIT v. Kalsi Tyre (P.) Ltd. [1981] 131 ITR 636 where it was held that the assessee employed certain industrial processes to worn out ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the inherent quality or chemical composition of the raw material. He, accordingly, submitted that by retreading, an article is produced and the assessee is entitled to investment allowance. 8. We have heard the rival submissions. Section 32A reads as follows : " Investment allowance.---(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 : (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :--- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of section 2(6)(d), we are of opinion that the above decision does not assist the case of the revenue here. There is no contrast in the present case, as there was in the Kerala case, between a manufacturing concern and a trading concern. In the present case, the assessee applies certain industrial processes to a worn out tyre and gives it a new lease of life ; the process, though not equivalent to the manufacture of a new tyre, stops very little short of it. The nature of the activity in the present case, which is clearly an activity of processing in the sense earlier discussed, is also akin in nature to an industrial or manufacturing activity. The only reason why it cannot be called manufacture is that the old article has not completely lost its identity or got converted into a new type of goods. But, as pointed out by the Tribunal, for all practical purposes and in the commercial sense of the term, the retreaded tyre is almost a new article and indeed it is well known that retreaded tyres are also separately sold in the market in the same way as newly manufactured tyres." 8.2 From the above decision it is clear that the retreaded tyre is almost a new article althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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