JUDGMENT This appeal under section 260A of Income-tax Act, 1961, has been filed by Revenue on following question of law: Whether on facts and in circumstances of case, learned Income-tax Appellate Tribunal was justified in upholding findings of Commissioner of Income-tax (Appeals) directing allowance of assessee s claim for investment allowance under section 32A of Income-tax Act, 1961 at Rs. 3,79,285 on new machineries installed in branch set for doing printing job on tin plates. assessment year in question is 1989-90. assessee-respondent feeling aggrieved by order of assessment dated March 15, 1990, by means of which plea of assessee that he was entitled to investment allowance to tune of Rs. 3,79,285.40, was rejected by Assessing Officer under section 143(3) of Act, filed appeal and Commissioner of Income-tax (Appeals) vide his order dated April 30, 1992, allowed said claim upsetting findings recorded by Assessing Officer and appeal preferred by Revenue before Income-tax Appellate Tribunal against order of Commissioner of Income-tax (Appeals) has been dismissed on May 20, 1999. Feeling aggrieved by aforesaid orders, present appeal has been filed by Revenue. facts relevant for present controversy are that assessee had maintained two sets of accounts in relevant assessment year, wherein he carried on two businesses, namely, one that of tyres and other of running industry of printing on tin plates. assessee had maintained two sets of account; one head office set styled M/s. Daljeet Tyres and other branch set styled M/s. Satguru Metal Printers. assessee claimed that his tin printing unit was industry involved in manufacturing process and therefore, was entitled to benefit of investment allowance, which he claimed at Rs. 3,79,285.40 in return for which adequate reserve of Rs. 2,85,000 had also been credited in books of account. investment allowance was claimed under section 32A of Act. Assessing Officer, by following reasoning, rejected claim of assessee: assessee in branch set does work of printing on tin plates. new machineries installed in branch set for doing printing job on tin plates do not qualify condition laid down in section 32A(2) of Income-tax Act, 1961, for grant of investment allowance as it nowhere refers to this printing of article and activities of same are not for purposes of business of generation or distribution of electricity or any other form of power and manufacture or production of any article or thing. claim of deduction of investment allowance is rejected. Commissioner of Income-tax (Appeals), considering reply of assessee, in which he had narrated about manufacturing process, involved, came to conclusion that material so processed was capable of being sold in acceptable form and, therefore, investment allowance on such plant and machinery used for such process was allowable. For reaching this finding he also relied upon decision of Income-tax Appellate Tribunal, Bangalore Bench in case of Krishna Associates v. ITO in I. T. A. No. 928 (Bangalore) of 1985 for assessment year 1984-85 [1987] 22 ITD 530. Reliance was also placed on decisions of Income-tax Appellate Tribunal Calcutta Bench B in case of Amiya Kumar Tarfdar v. ITO in I. T. A. No. 297 (Calcutta) of 1984 for assessment year 1980-81 [1985] 14 ITD 172. Thus, Commissioner of Income-tax (Appeals) allowed investment allowance after holding that assessee was, by utilizing plant and machinery to process such material, was engaged in production of thing. This view was upheld by Appellate Tribunal also. relevant extract of section 32A is being quoted below: 32A.(1) In respect of ship or aircraft or machinery or plant specified in sub-section (2), which is owned by assessee and is wholly used for purposes of business carried on by him, there shall, in accordance with and purposes of business carried on by him, there shall, in accordance with and subject to provisions of this section, be allowed deduction, in respect of previous year in which ship or aircraft was acquired or machinery or plant was installed or, if ship, aircraft, machinery or plant is first put to use in immediately succeeding previous year, then, in respect of that previous year, of sum by way of investment allowance, equal to twenty-five per cent. of actual cost of ship, aircraft, machinery or plant to assessee: Provided that... (2) ship or aircraft or machinery or plant referred to in subsection (1) shall be following, namely: (a) new ship or new aircraft acquired after 31st day of March, 1976, by assessee engaged in business of operation of ships or aircraft; (b) any new machinery or plant installed after 31st day of March, 1976, (i) for purposes of business of generation or distribution of electricity or any other form of power; or (ii) in small-scale industrial undertaking for purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for purposes of business of construction, manufacture or production of any article or thing not being article or thing specified in list in Eleventh Schedule: In accordance with section 32A, sub-section (2)(b)(ii), machinery or plant as specified under sub- section (2)(b) has to be installed by assessee and has to be used wholly for purpose of business by small scale industrial undertaking for purposes of business of manufacturing or production of any article or thing. assessee s claim was rejected by assessing authority on ground that new machinery installed in branch set for doing printing job on tin plates, does not qualify conditions laid down under section 32(A)(2) for grant of investment allowance, as it nowhere refers to printing of articles and activities of same are not for purposes of business of generation or distribution of electricity or any other form of power and manufacture or produce of any article or thing. Investment allowance under section 32A is available to small-scale industrial undertaking for purposes of business of manufacture or production of any article or thing. It has been strongly contended by assessee that plant and machinery was being used for printing tin plates and process involved clearly established that articles so produced were capable of being sold in acceptable form in market. assessee in his reply dated March 5, 1990, while explaining process involved, stated as under: Satguru Metal Printers get design made then negative and positive of design is got made and then impression of this is taken on microfinished plate and this plate is put on automatic offset printing machine and then tin sheets are printed and are sent through dryer for drying. This process is repeated for each colour to be printed. case of Amiya Kumar Tarfdar v. ITO [1985] 14 ITD 172 (Cal) of Income-tax Appellate Tribunal Bench B , which has been placed before us for supporting claim of assessee, was case with respect to investment allowance in regard to colour photo developing machine which accepted negatives, cut paper fed it into different sizes and developed, printed and delivered final product in different colourful sizes and designs. Tribunal held as under: Investment allowance is available to small-scale industrial undertaking established for manufacture or production of any article or thing. assessee, being registered as small-scale industry with State Government, was printing and developing various articles from negatives inserted in imported machine. final product was something different from negative or white paper which was inserted in machine, and it was coming in different sizes. Therefore, if operation of machine was taken into different sizes. Therefore, if operation of machine was taken into consideration along with final product, it would be clear that assessee was manufacturing article with machine. Tribunal thus allowed claim of investment allowance under section 32A. In case of Asst. CIT v. Soni Photo Films P. Ltd. [2000] 245 ITR (AT) 11 (Delhi) [SB], assessee was engaged in business of developing and printing of photographs. assessee filed his income-tax return for first year of business along with audited balance-sheets and profit and loss account showing loss income, and claimed investment allowance on purchase of photographic apparatus. Assessing Officer disallowed investment allowance on ground that activity of assessee did not involve manufacture or production of article or thing and also because assessee had failed to create statutory reserve which was sine qua non for claiming investment allowance. Commissioner (Appeals) held that in absence any statutory reserve assessee could not be allowed investment allowance during year, but in subsequent year, if assessee would be able to create statutory reserve, it would become entitled to grant of investment allowance. On Revenue s appeal, Division Bench of Tribunal accepted Revenue s arguments and understood activity of assessee as working or developing of photographs which is normal connotation, not termed as manufacturing of photographs. Since several Benches of Tribunal had held contrary views, Division Bench referred matter to Full Bench. emphasis has been placed on following observations of Special Bench of Tribunal (headnote of [1998] 67 ITD): ... Therefore, negative photograph is not same thing as empty film roll and it is quite distinct and different thing than what is fitted into camera. One is not concerned whether photo thus supplied to customer is sale of article or thing. question whether it is sale or whether it is service contract is not at all relevant for purposes of examining whether assessee is entitled to investment allowance under section 32A or not. What is relevant is whether there is any manufacture or processing involved in activity carried on by assessee or in taking photo developing into positive film, colouring it and handing it over to customer. This makes all difference. Revenue s contention was not tenable that simply because assessee was engaged in production of taking films, developing films into positive films and running colour photo lab by itself did not earn him investment allowance within meaning of section 32A since his business activity did not amount to either manufacture or production of article or thing. Further reliance has been placed on following observations (headnote of [1998] 67 ITD): It is not necessary that original article or material should have lost its identity completely. All that is important is whether what is emerged as result of operations is different commercial commodity having its own name, identity, character or end-use. In instant case, applying test, negative vacant film roll fitted or kept in or fitted into camera is quite different and distinct article than photograph which can be taken on negative film. Nobody calls photo as equal to negative film. negative film loses its identity completely and photo is quite different commercial commodity having its own identity, character and end-use. Therefore, what is involved while taking photograph by photographer is manufacture. case of Asst. CIT v. Kohli Bros. Colour Lab. P. Ltd. decided by Income-tax Appellate Tribunal, Allahabad Bench , Allahabad for assessment year 1986-87 on March 17, 1999, is also placed before us, where it was case of Revenue that photographic apparatus and goods being articles or things listed in XIth Schedule, assessee is not entitled to investment allowance under section 32A of Income-tax Act on imported computerized colour process machine. Tribunal accepted finding recorded by Commissioner of Income-tax (Appeals), which said that appellant was not correct in holding that appellant was engaged in business of manufacture of any of items as specified in XIth Schedule and that appellant was not manufacturing any photographic apparatus or equipment and relying upon judgment of Calcutta Bench B in case of Amiya Kumar Tarfdar v. ITO referred to above, assessee was granted investment allowance. In case of CIT v. Professional Information Systems and Management [2005] 274 ITR 242 (Guj), question arose as to whether data processing through computer amounts to production of article or thing, and whether assessee was eligible for investment allowance on cost of computer under section 32A. In this case assessee was engaged in business of providing computer services to various concerns and received income by way of service charges for such activity. During year under consideration assessee- company purchased computer and claimed investment allowance on same under section 32A of Act. Assessing Officer rejected claim of assessee but in appeal his plea was accepted and it was found that assessee was engaged in business of manufacturing and providing, data systems after using processing machines and thus it was engaged in business of manufacturing of articles or things and that computer is plant . This order was upheld by Tribunal, against which matter went to High Court in reference. Gujarat High Court, after taking into consideration large number of judgments of different courts and after analysing entire case law, held as under (page 255): ... that test for determination as to whether machinery/apparatus can be termed as plant or not would primarily depend upon function to which said machinery/apparatus is put, regardless of location where machinery/apparatus is situated. This is over and above test of end- product being entirely different commercial commodity vis-a-vis input. Therefore, in case of computer system or data processing system, inputs which are fed in are entirely different, in different form with different indicators. As against that, end-product, viz., balance-sheets, various accounts, statements, analysis, etc. which emerge by way of print outs are distinct and different from inputs, inasmuch as what comes out is having different connotation and use. Thus, activity of data processing through use of computers is one which would amount to business of manufacture or production of articles or things and unit which undertakes such computer services for other concerns would be industrial undertaking. court thus concluded that assessee-company which provides computer services to other concerns was industrial undertaking engaged in business of manufacture or production and was thus eligible for investment allowance under section 32A of Act on cost of computer. apex court in case of CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308; [1998] 3 SCC 605, had occasion to consider meaning, import and scope of section 32A. In said case claim of investment allowance was made by assessees, which were financial companies. They were not themselves manufacturers of any article or thing. They purchased machinery and hired out same to manufacturers under agreements of hire. hirer- manufacturer in turn used machinery for purposes specified in section 32A(2)(b)(iii). agreement of hire did not involve any element of sale. High Courts of Karnataka and Madras held respondent-assessees to be entitled to investment allowance under section 32A of Act. plea of appellant-Revenue that investment allowance can be claimed by assessee only in case where assessee is owner of machinery and also uses machinery himself and not otherwise, was rejected by Supreme Court. court extracted following conditions from section 32A to be satisfied for having benefit of investment allowance, namely, in respect of plant and machinery for which investment allowance is claimed in any relevant previous year. (1) machinery should be owned by assessee. (2) It should be wholly used for purposes of business carried on by assessee, and (3) machinery must come under any of categories specified in section 32A(2). After considering aforesaid three conditions, court allowed claim of financial companies for investment allowance. court held that if requirements of section 32A are fulfilled, namely, machinery is owned by assessee, machinery is used for purpose of assessees business and machinery is as specified in sub-section (2), assessee would be entitled to investment allowance under section 32A. court also considered provisions relating to investment allowance as against provisions of section 33 of Income-tax Act, 1961, and held as under (page 313): provisions relating to investment allowance are akin to provisions under section 33 of Income-tax Act, 1961, relating to development rebate which was discontinued with effect from April 1, 1974, by notification issued by Central Government. From April 1, 1976, however, section 32A was introduced in Income-tax Act, 1961, granting investment allowance under Finance Act, 1976. circular of Department being Circular No. 202 (see [1976] 105 ITR (St.) 17) dated July 5, 1976, which explained provisions of Finance Act, 1976, pertaining to direct taxes, refers to investment allowance in para. 23.1. (see [1976] 105 ITR (St.) 30). It is stated that new scheme of investment allowance is broadly on lines of development rebate scheme that was discontinued earlier. (para. 23.2) Whereas development rebate was allowed at varying rates, investment allowance will be admissible at uniform rate of 25 per cent. only. Describing provisions of section 32A(2), circular states that new ships and new aircraft acquired after March 31, 1976, by taxpayers engaged in 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 hands of taxpayers carrying on business of operating ships or aircrafts and 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, cir cular does not prescribe any such condition of assessee himself carrying on business of manufacturing. circular thus clearly brings out difference between section 32A(2)(a) and section 32A(2)(b). Allahabad High Court in case of Singh Engineering Works P. Ltd. v. CIT [1979] 119 ITR 891, while considering deductions under section 80-I of Income-tax Act, 1961, which have since been omitted by Finance Act, 1972, with effect from April 1, 1973, laid down that broad distinction between manufacture and production is that manufacture brings into existence new product, product which is of different chemical composition or whose integral product, product which is of different chemical composition or whose integral structure is different from raw materials. Production, as distinguished from manufacture, is nothing except bringing into existence product after processing raw materials in manner which may not change inherent quality or chemical composition of raw material and, therefore, if iron bars and rods manu factured or produced by assessee are covered by entry 1, source of raw material is entirely irrelevant and immaterial. Therefore, assessee cannot be denied relief under section 80-I of Act in respect of turnover of iron rods and bars manufactured or produced from billets purchased from outside. assessee in this case, is small scale undertaking, fact which is not disputed and it qualifies all three conditions given under section 32A, explicitly set down, in case of CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308 (SC). In view of various authorities referred to above, it cannot be disputed that assessee was entitled for investment allowance for plant and machinery which was installed after prescribed date and was being used for business, wherein by process of manufacture printed and colour tin sheets were produced, which were capable of being sold in market in acceptable form. We thus do not find any illegality in order passed by Commissioner of Income-tax (Appeals) and view of Appellate Tribunal. appeal has no force and is dismissed. *** COMMISSIONER OF INCOME TAX v. DALJEET TYRES