J.H. AND SONS v. INCOME TAX OFFICER
[Citation -1986-LL-0630-3]

Citation 1986-LL-0630-3
Appellant Name J.H. AND SONS
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 30/06/1986
Assessment Year 1979-80
Judgment View Judgment
Keyword Tags investment allowance • plant and machinery • development rebate • engineering goods • special bench • job work
Bot Summary: The assessee is carrying on job work for M/s Mukund Iron and Steel Ltd. T h e Assessee's customers M/s Mukund Iron and Steel Ltd. supply rough castings to the assessee for carrying out some job work like grinding, smoothing and levelling of the surface. After carrying out the work, the assessee returns the articles of M/s Mukund Iron Steel Ltd. For this type of work of fabrication the assessee installed certain plant and machinery on which investment allowance under s. 32A has been claimed. According to him the job work of fabrication of engineering goods, grinning and the similar type of job work done by the assessee cannot be said to be business of manufacturing in terms of s. 32A He accordingly, issued notice under s. 263 Rejecting the explanations offered, the CIT held that the assessee was not carrying on any manufacturing activity and was not entitled to investment allowance under s. 32A. He accordingly set aside the order of the ITO with a direction that he will reframe the assessment afresh according to law. Similar point came up for consideration before the Special Bench of the Tribunal in the case of Thiagaraja industries and on similar facts the Tribunal held that the assessee was entitled to investment allowance under s. 32A of the IT Act. Shri Patil contended that the activities of the assessee being exactly the same as in the case of the Madras High Court and those before the Special Bench of the Tribunal, the claim of the assessee is rightly allowable. The Special Bench carefully examined the various activities undertaken by the assessee and eventually held as follows: The fact that the product, which originally was a rough casting comes out a s a new product called 'step processed bearing shells' which alone was required to be fitted to the goods wagons, itself justified the assessee's claims that it was the manufacturing process that was more necessary than the ownership of articles which it manufactured. On similar activities, as undertaken by the assessee, we are inclined to uphold the contentions in the light of the decision of the Special Bench of the Tribunal in the above case.


V. DONGZATHANG, A.M. This appeal is filed by assessee against order of Commissioner of Income Tax (CIT) under s. 263. assessee is carrying on job work for M/s Mukund Iron and Steel Ltd. T h e Assessee's customers M/s Mukund Iron and Steel Ltd. supply rough castings to assessee for carrying out some job work like grinding, smoothing and levelling of surface. After carrying out work, assessee returns articles of M/s Mukund Iron & Steel Ltd. For this type of work of fabrication assessee installed certain plant and machinery on which investment allowance under s. 32A has been claimed. ITO allowed claim. On examination of assessment records of assessee firm for year under consideration CIT was of view that order of ITO was erroneous in so far as it is prejudicial to interest of Revenue. According to him job work of fabrication of engineering goods, grinning and similar type of job work done by assessee cannot be said to be business of manufacturing in terms of s. 32A He accordingly, issued notice under s. 263 Rejecting explanations offered, CIT held that assessee was not carrying on any manufacturing activity and, therefore, was not entitled to investment allowance under s. 32A. He accordingly set aside order of ITO with direction that he will reframe assessment afresh according to law. assessee is aggrieved and has come up in appeal before us. Shri V.H. Patil, ld. counsel of assessee vehemently objected to order of CIT under s. 263. According to him issue is squarely covered by decision of Madras High Court in case of Perfect liners vs. CIT (1983) 142 ITR 654 (Mad). ld. counsel also relied on decisions of special Bench of Tribunal in cases of Thiagaraja Industries vs. ITO (1983) 3 SOT 505 (Mad) (SB), ITO vs. Poyilakkada Fisheries (P) Ltd. (1985) 14 ITD 224(Coch) and that of Bangalore Special Bench of Tribunal in case of Sixth ITO vs. General s New Trade (1985) 23 TTJ (Bang) 259 (SB): (1985 13 ITD 460 (Bang) (SB). According to him decision of Madras High Court in above case is on all fours with that of assessee. In that case assessee brought rough castings, polished them and supplied same to other manufacturing concerns. ITO rejected claim of development rebate made by assessee. AAC, however, accepted assessee s contention and Tribunal confirmed order of AAC. On reference High Court held that word "manufacture" has to be understood in wide sense. After rough casting was polished, product was new product which was utilised as component in internal combustion. Similar point came up for consideration before Special Bench of Tribunal in case of Thiagaraja industries (supra) and on similar facts Tribunal held that assessee was entitled to investment allowance under s. 32A of IT Act. Shri Patil, therefore, contended that activities of assessee being exactly same as in case of Madras High Court and those before Special Bench of Tribunal, claim of assessee is rightly allowable. It is, therefore, submitted that order of ld. CIT should be set aside and that of ITO be restored. On other hand, Shri R. Raju, ld. departmental representative relied on order of Commissioner. In view of specific finding recorded by CIT and also keeping in view various case laws cited in this behalf, it is claimed that no interference is called for in this regard. On careful consideration of rival submissions in light of material placed on our record, we see merit in appeal. assessee in this case is doing job work of fabrication of engineering goods, grinding and other similar type of work. Identical case came up before Tribunal (Special Bench) in case of Thiagaraja Industries (supra). Special Bench carefully examined various activities undertaken by assessee and eventually held as follows: "The fact that product, which originally was rough casting comes out s new product called 'step processed bearing shells' which alone was required to be fitted to goods wagons, itself justified assessee's claims that it was manufacturing process that was more necessary than ownership of articles which it manufactured". On similar activities, as undertaken by assessee, we are inclined to uphold contentions in light of decision of Special Bench of Tribunal in above case. Such view has authority of decision of Madras High Court in case of M/s. Perfect Liners (supra). We therefore, hold that assessee is entitled to benefits of investments allowance under s.32A of Act. Accordingly, we sets aside order of Commissioner under s. 263 and restore that of ITO. In result, appeal is allowed. *** J.H. AND SONS v. INCOME TAX OFFICER
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