B.P. Saraf, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue, the following question of law has been referred by the Income-tax Appellate Tribunal to this court for opinion :
'Whether, on the facts and in the circumstances of the case, the asses-see-company having business of 'business consultants', was an industrial undertaking for the purpose of manufacture or production of any article or thing as envisaged by Section 32A(2)(b)(iii) of the Income-tax Act, 1961, and is entitled to 'investment allowance' in the assessment year 1980-81 ?'
2. The assessee is a private limited company and carries on the business of 'business consultants'. As a part of its consultancy business, the assessee-company undertakes data processing work with the help of electronic computers. For this purpose, in the previous year ending on September 30, 1979, relevant to the assessment year 1980-81, the assessee company acquired a computer and claimed investment allowance under Section 32A of the Income-tax Act, 1961 (the 'Act'), in respect thereof. The Income-tax Officer rejected this claim of the assessee on the ground that there was no manufacturing activity undertaken by the assessee and hence the assessee was not entitled to investment allowance under Section 32A of the Act. The assessee appealed to the Commissioner of Income-tax (Appeals). Before the Commissioner of Income-tax (Appeals), it was contended by the assessee that its business activity as consultants involved processing of data for drawing up statements of accounts, inventory control, pay-rolls, sales registers, etc. It was further contended that the data was analysed by the assessee according to various computer programmes and then processed to produce printed registers such as sales register, journals, ledgers, etc It was submitted that this activity amounted to manufacturing activity, and, hence, the assessee was entitled to investment allowance in respect of the machinery and plant, i.e., the computer used for that purpose. The Commissioner of Income-tax (Appeals) accepted this contention of the assessee and remitted the matter to the Income-tax Officer with a direction to allow the assessee's claim of investment allowance after satisfying himself that the conditions specified in Section 32A were fulfilled. The appeal of the Revenue against the above order was rejected by the Income-tax Appellate Tribunal (the 'Tribunal'). Hence, this reference at the instance of the Revenue.
3. We have perused the order of the Tribunal. The Tribunal has accepted the contention of the assessee that the computer was a machinery and not an office appliance and that the assessee's activity as consultants of processing data and preparing sale registers and other statements for its clients constituted manufacturing activity. We have heard Mr. R.V. Desai, learned counsel for the Revenue, who submits that the Tribunal committed a manifest error of law in arriving at the above conclusions. According to him, neither the activity of the assessee amounted to manufacturing activity nor did the assessee manufacture any article or thing. The assessee, according to learned counsel, is not an industrial undertaking. Its consultancy business is purely business or professional activity and the computer is an office appliance.
4. We have carefully considered the above submissions. The controversy pertains to the entitlement of the assessee to investment allowance under Section 32A of the Act. The assessment year involved in this reference is 1980-81. Section 32A, as it stood at the material time, so far as relevant, reads as follows :
'32A. Investment allowance.--(1) In respect of a ship or an aircraft or machinery or plant specified in Sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent, of the actual cost of the ship, aircraft, machinery or plant to the assessee :
Provided that no deduction shall be allowed under this section in respect of-
(a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house ;
(b) any office appliances or road transport vehicles ;
(c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33 ; and
(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profits and gains of business or profession' of any one previous year.
(2) The ship or aircraft or machinery or plant referred to in Sub-section (1) shall be the following, namely :--
(a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft;
(b) any new machinery or plant installed after the 31st day of March, 1976-
(i) for the purposes of business of generation or distribution of electricity or any other form of power ; or
(ii) for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule ; or
(iii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing . . .
Explanation.--For the purposes of this sub-section and sub-sections ...
(2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed ten lakh rupees . . .' (emphasis' supplied)
5. It is clear from the perusal of the above section that the assessee would be entitled to investment allowance in respect of any machinery or plant only if such machinery or plant is used for the purpose of business of construction or manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule or in a small-scale industrial undertaking for the purpose of business of manufacture or production of any other articles or things. Admittedly, the assessee is not manufacturing or producing any articles or things specified in the list in the Ninth Schedule. The case of the assessee is that it falls in the second category, i.e., it is a small-scale industrial undertaking engaged in the business of manufacture or production of articles or things. The Tribunal has accepted this contention. We have given our careful consideration to the above submission of the assessee. Admittedly, the assessee-company, is engaged in the consultancy business and as a part of its consultancy business, it undertakes data processing work which is done with the help of electronic computers. We do not find how the assessee in such a case can claim itself to be an industrial undertaking. Only because it is using computers in its consultancy business, it cannot be regarded as an industrial undertaking. Moreover, no article or thing is manufactured or produced by the company. Preparation of statements on the basis of the data processed by the assessee cannot amount to manufacture or production of any article or thing. The word 'article' came up for interpretation before the Supreme Court in CIT v. N.C. Budharaja and Co, : 204ITR412(SC) . The Supreme Court held that the word 'article' must be understood in its normal connotation the sense in which it is understood in the commercial world. In the instant case, it is difficult to say that the assessee, who is a consultancy firm, is engaged in the manufacture of articles or things. The statements, etc., prepared by the assessee with the help of the computer containing the result of data processing cannot be regarded as articles or things within the meaning of these words used in Section 32A of the Act. It is thus clear that the assessee is not an industrial undertaking engaged in the business of manufacture or production of any article or thing. That being so, the assessee is not entitled to investment allowance under section 32A of the Act. In that view of the matter, the Tribunal was not justified in granting the same.
6. In view of the above, the question referred to us is answered in the negative, i.e., in favour of the Revenue and against the assessee.
7. Reference stands disposed of accordingly with no order as to costs.
8. Certified copy expedited.