Income Tax Appellate Tribunal - Bangalore
Krishna Associates vs Income-Tax Officer on 16 April, 1987
Equivalent citations: [1987]22ITD530(BANG)
ORDER
T.N.C. Rangarajan, Judicial Member
1. This appeal relates to the claim of the assessee for investment allowance under Section 32A of the Income-tax Act, 1961. The admitted facts are that the assessee is engaged in the business of the data processing. The services are rendered mainly for M/s. Quality Biscuits Co. For that purpose, the assessee had purchased a computer for Rs. 4,61,760 and claimed investment allowance of Rs. 1,15,429 thereon. The Income-tax Officer on the directions of the Inspecting Assistant Commissioner held that data processing did not involve construction, manufacture or production of any article or thing so as to fulfil the conditions required under Section 32A for being eligible for the investment allowance. On appeal, the Commissioner (Appeals) also rejected the claim in the same view.
2. In the further appeal before us, it was pointed out on behalf of the assessee that the assessee was producing the processed data which was printed on papers supplied by the assessee and given to the customer. It was submitted that such processed data printouts were actually things produced by the assessee, and therefore, the assessee had fulfilled the conditions required for investment allowance. On the other hand, the contention of the revenue was that there was no manufacturing activity as such, and hence, the assessee was not entitled to any relief.
3. On a consideration of rival submissions, we are of the opinion that the assessee is entitled to succeed. Under Section 32A the assessee is entitled to the investment allowance if the machinery is installed in an industrial undertaking for the purpose of business of construction, manufacture or production of any article or thing. The only point in dispute between the parties is whether the computer purchased by the assessee is used for the purpose of business of construction, manufacture or production of any article or thing. Even if we agree with the revenue that there cannot be a manufacture in the sense of a material having been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man, it cannot be denied that the assessee was engaged in the production of a thing. This is because the word 'production' is of wider meaning than the word 'manufacture' [see Singh Engg. Works (P.) Ltd. v. CIT [1979] 119 ITR 891 (All.)]. It is not in dispute that the data given by the customers is processed and printed by the computer and therefore, it cannot be denied that such print-outs are things produced by the assessee. We may refer to the case of CIT v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811 (Guj.) where it was held that printing of balance sheets by itself would constitute a manufacturing activity. In that background, the data processed and printed-out would certainly be a thing produced by the assessee even if not a thing manufactured by the assessee. In the circumstances, we are convinced that the assessee had fulfilled the conditions prescribed and was, therefore, entitled to the deduction under Section 32A. We direct the Income-tax Officer to recompute the total income by granting the deduction claimed and we also authorise the Income-tax Officer to amend the assessments of the members of AOP as a consequence. The appeal is allowed.