Commissioner of Income Tax vs Sri Ranganathar and Co.

Thanikkachalam J.

At the instance of the Department, the Tribunal referred the following question for the opinion of this court, u/s 256(1) of the Income Tax Act,

1961 :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the assessee is entitled to

investment allowance prescribed u/s 32A(2) of the Income Tax Act, 1961, for the assessment year 1978-79 ?

The point for consideration is, whether the assessee, which is engaged in the business of executing civil contract works is entitled to investment

allowance u/s 32A(2) of the Income Tax Act, 1961, for the assessment year 1978-79. The Income Tax Officer granted the investment allowance

u/s 32A(2) but the Commissioner of Income Tax, exercising his jurisdiction u/s 263 of the Income Tax Act, 1961, withdrew the investment

allowance granted by the Income Tax Officer. The matter came up by way of second appeal before the Tribunal. The Tribunal held that inasmuch

as the assessee succeeded on the merits in getting the investment allowance u/s 32A(2) of the Act, it is not necessary to go into the question of

jurisdiction exercised by the Commissioner of Income Tax u/s 263 of the Act. Now, learned standing counsel appearing for the Department,

brought to our notice a decision of the Supreme Court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and

Others, , wherein the Supreme Court held that when the assessee engaged in construction work, the assessee is not doing any manufacture or

processing, and, therefore, is not entitled to investment allowance u/s 32A. Therefore, in view of the said decision of the Supreme Court, we have

to hold that the Tribunal was not correct in granting investment allowance u/s 32A(2) of the Income Tax Act, 1961, in favour of the assessee in the

present case. Accordingly, we answer the question referred to us in the negative and in favour of the Department. No costs. However, now the

Tribunal is directed to dispose of the appeal on the question of jurisdiction exercised by the Commissioner of Income Tax u/s 263 of the Act, on

merits, after giving an opportunity of being heard to the assessee.