The Commissioner of Income Tax vs Aicam Engineering Pvt. Ltd.

F.M. Ibrahim Kalifulla, J.—The Revenue has come forward with these appeals and the substantial questions of law framed are as under:

Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the Assessee company for the

assessment years 1986-87, 1994-95 and 1995-96 is entitled to relief u/s 32A and 80IA when the Assessee company merely does the work of

erection of steel plant which does not involve manufacturing process?

Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law in following the case of Commissioner of Income

Tax Vs. K.S. Venkataraman and Co., , when in the Assessee''s own case for the assessment year 1983-84 the Hon''ble jurisdictional High Court

in T.C. No. 753 of 1991 dated 26.08.2002 has held that the Assessee''s activity would not amount to ''manufacture''?

The issues centers around the question whether the Respondent Assessee is entitled for the benefits unders Section 32A and 80IA of the

Income Tax Act, 1961, hereinafter referred to as the Act, on the footing that it is involved in the manufacture of articles and things. Section 32A of

the Act inter alia stipulates that in order to avail the benefit of Investment Allowance, the Assessee should own a plant or an industrial undertaking

for the purpose of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the

Eleventh Schedule. Similarly, u/s 80IA of the Act, as it stood at the relevant point of time, sub Clause 12 (b) stipulates that for the purpose of that

Sub-section an industrial undertaking shall have the meaning assigned to it in the Explanation to Section 33B. Explanation to Section 33B defines

an ""Industrial Undertaking"" to mean, "" any undertaking which is mainly engaged in the business among other things in the manufactur or processing

of things"". Therefore, the relevant criteria to be applied for the Assessee to claim the Investment Allowance u/s 32A and the deduction provided

u/s 80IA of the Act was to show that it is an Industrial Undertaking engaged in the manufacture of articles or thing or things. In fact, the present

assessment order came to be passed pursuant to a remittal order of this Court passed in the decision reported in Commissioner of Income Tax Vs.

Aicam Engineering P. Ltd., as well as the directions of the Hon''ble Income Tax Appellate Tribunal to the assessing authority to extend an

opportunity of hearing to the Respondent Assessee to substantiate the claim of Investment Allowance u/s 32A and deduction u/s 80IA of the Act.

It is pursuant to the above referred to remand order that the assessing authority determined the issue and held that the Respondent Assessee is a

contracting firm and cannot therefore be held to be an industrial undertaking enganged in the manufacturing activity. However, the C.I.T. Appeals

as well as the Tribunal held that as part of its contractual operations, the Respondent Assessee is also involved in manufacture of articles and things

and, therefore, it would qualify for relief u/s 32A and Section 80IA of the Income Tax Act.

We heard Mr. K. Subramaniam, learned Standing counsel appearing for the Revenue and Mr. V.S. Jayakumar, learned Counsel appearing for

the Assessee.

At the very outset Mr. Subramaniam relied upon the order passed by a Division Bench of this Court dated 26.08.2002 made in T.C. No: 753

of 1991 which is also related to the very same Assessee. The questions of law framed thereunder were also mostly related to the issue as to

whether the Respondent Assessee was entitled for the deduction u/s 32A - Investment Allowance and whether it can be said that the Assessee is

involved in manufacturing activity namely manufacutre of an article or thing. The learned standing counsel then contended that some of the statutory

forms submitted by the Respondent Assessee itself relates to the contracting firms and not related to manufacturing establishments. The learned

standing counsel therefore contended that having regard to the stand that the Respondent Assessee has engaged contract workers for erection of

various equipments for different parties, its activities cannot be brought within the term ""Industrial Undertaking"" in order to extend the benefits u/s

32A and Section 80IA of the Income Tax Act, 1961.

On the above submissions Mr. V.S. Jayakumar learned Counsel appearing for the Respondent Assessee contended that a detailed list of

manufacturing activities carried on by the Respondent Assessee have been furnished before the assessing authority as well as the C.I.T. (Appeals)

and that the C.I.T. (Appeals) perused the records and then rendered a factual finding that the Respondent Assessee, in the course of enforcing its

contractual obligations, was involved in very many operations of supply of industrial equipments and, therefore, simply because the Respondent

Assessee was involved in the business of errection of various equipments, the revenue cannot contend that there was no manufacturing operations

carried on by the Respondent Assessee to deny the benefits of Section 32A and Section 80IA of the Act.

We see some force in the submission of the learned Counsel appearing for the Respondent / Assessee. In fact a perusal of the details culled out

by the Commissioner of Income Tax (Appeals) while passing the order dated 09.09.2008 pertaining to the assessment years 1986-''87, 1994-''95

and 1995-''96 would disclose the various products and equipments manufactured and supplied by the Respondent Assessee to its customers / end

users whcih was running to Rs. 2.50 crores to Rs. 11.81 crores. In fact, in its detailed reply, the Respondent / Assessee has explained the nature

of its operations for its different principals. In one such statement the Respondent / Assessee has submitted that it used to purchase raw materials,

manufacture and supply and errect for various public undertakings several industrial equipments comprising boilers and piping systems, heaters,

crane girders, different steel plant equipment, chemical columns, girders for MRTS, power generating equipment for North Madras Refinery,

various equipments for refinery maintenance, air pre-hearing system for cauvery refinery of MRL and different other mechanical equipment for

cement plants. The above details furnished by the Respondent Assessee supported by material documents sufficiently demonstrated before both

the lower authorities to confirm that the Respondent Assessee was squarely covered by the expression ""Industrial Undertaking"" by virtue of its

manufacturing activity in the course of its business of contract of supply and errection of various equipments for different public sector undertaking.

Such overwhelming evidence did weigh with the lower authorities to hold that the Respondent Assessee was entitled to the benefits u/s 32A and

Section 80IA of the Income Tax Act, 1961. Having regard to such detailed consideration of relevant materials by the lower appellate authorities

and the Tribunal which had reached a finding of fact as regards teh manufacturing acitivity of the Respondent Assessee, there is no scope for

interference on such finding of fact arrived at by the Tribunal. The Tribunal also followed the decision of the Division Bench of this Court rendered

in Commissioner of Income Tax Vs. K.S. Venkataraman and Co., while confirming the order made by the C.I.T. (Appeals). Apart from the above

said detailed discussion and consideration of material documents by the C.I.T. (Appeals), which was confirmed by the Tribunal, no other materials

were available on record. Though the earlier order dated 26.08.2002 made in T.C. No: 753 of 1991 relates to the very same Assessee, the said

decision cannot be applied to the case on hand. We are, therefore, convinced tha t the order of the Tribunal, confirming the order of the C.I.T.

(Appeals), is perfectly in order and the questions of law are answered against the Appellant. The tax case appeals fail and the same are dismissed.