Per Shri K. S. Viswanathan, Accountant Member - In this departmental appeal the only issue is whether the assessee would be entitled to investment allowance. The assessee is a private limited company. They have a business of refining various kinds of edible and non-edible oil.
The activity of refining various kinds of materials includes processes of degumming, neutralisation, bleaching and deodorization. The input is various types edible oil which gets converted into refined edible oil.
The assessees customers for the use of refined oil are mainly manufacturers of chocolates and confectioneries.
2. The ITO held that the assessee was not a manufacturing concern and, therefore, the assessee could not be considered eligible for investment allowance. The Commissioner (Appeals), on the other hand, held that the assessee was a small scale industry and, therefore, they were entitled to the allowance. He also gave a finding that the assessee was a manufacturing concern.
3. After hearing the parties before us, we are of opinion that the ITOs order should be restored. The question is whether the assessees activities would amount to business of manufacture or production of any articles or things. The activities of the assessee are similar to the activities considered by the Supreme Court in the case of Tungabhadra Industries Ltd. v. CTO AIR 1961 SC 412. Therein, the Supreme Court considered the question whether hardened or hydrogenated groundnut oil commonly called vanaspati was still groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax Rules, 1939. The learned judge observed that even after such manufacturing process there was no change in the essential nature of the oil. In our opinion, this decision squarely applies to the facts of the case before us. The assessee cannot be treated as manufacturing or producing an article..
The essential nature of the raw material used by them does not change.
This is a basic requirement to show that the assessee had manufactured something. Under these circumstances, we would allow the department appeal.