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Sri Balaji Metal Finishers Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1986)15ITD26(Hyd.)
AppellantSri Balaji Metal Finishers
Respondentincome-tax Officer
Excerpt:
1. this is an appeal filed by sri balaji metal finishers, secunderabad against the order of commissioner hyderabad, for the assessment year 1979-80.2. the assessee is a company incorporated for job works for electroplating. the assessee claimed investment allowance and was allowed the same at 25 per cent on an outlay of rs. 1,43,593 working out to rs. 35,898. the assessee had made reserve as required and the ito allowed the investment allowance as claimed. since the assessee had only a loose investment allowance was indicated in the assessment order as an amount which would be carried forward. the commissioner noticed the assessment. he was of the view that the activity of electroplating cannot be treated as manufacture and that, therefore, investment allowance was wrongly allowed. he.....
Judgment:
1. This is an appeal filed by Sri Balaji Metal Finishers, Secunderabad against the order of Commissioner Hyderabad, for the assessment year 1979-80.

2. The assessee is a company incorporated for job works for electroplating. The assessee claimed investment allowance and was allowed the same at 25 per cent on an outlay of Rs. 1,43,593 working out to Rs. 35,898. The assessee had made reserve as required and the ITO allowed the investment allowance as claimed. Since the assessee had only a loose investment allowance was indicated in the assessment order as an amount which would be carried forward. The Commissioner noticed the assessment. He was of the view that the activity of electroplating cannot be treated as manufacture and that, therefore, investment allowance was wrongly allowed. He issued notice to show cause why the investment allowance should not be withdrawn acting under Section 263 of the Income-tax Act, 1961 ('the Act'). The assessee replied with reference to case law that the assessee's activity constituted manufacture. The assessee's arguments were found unaccountable inasmuch as the Commissioner found that electroplating was akin to galvanising and that galvanising was not treated as manufacture in the decision of the Calcutta High Court in CIT v. Hindus than Metal Refining Works (P.) Ltd. [1981] 128 ITR 472. Relying upon this decision, he directed the ITO to withdraw the investment allowance. The assessee is, therefore, in appeal against the said order.

3. The learned representative for the assessee took us over the accounts of the assessee and described its activities. He claimed that the assessee has used the machinery which was purchased at a cost of nearly Rs. 1.5 lakhs for electroplating various industrial and other items like parts for fan equipment, scooter, refrigerators and rickshaws besides electroplating safety pins, hair pins, nuts, bolts, screws and washers, etc. He also pointed out that the assessee purchased various raw materials which included metals, acids, chemicals, oils, emery wheel, etc. Though the assessee was doing job works for others, there was considerable outlay of materials and that the cost of such materials and direct expenses like direct wages amounted to 67.56 per cent of the total receipts. This, according to him, indicated the extent of materials used. He referred to definitions under sales tax law and the Factories Act, 1948, to support his claim that even mere ornamentation or coating may involve manufacture. He also sought to buttress his case by a "technical opinion from Andhra Pradesh Industrial & Technical Consultancy Organisation Ltd., a subsidiary of Industrial Development Bank of India to the effect that the assessee's activity would constitute manufacture. This report also sought to distinguish electroplating process from galvanising process.

With the aid of this report and other technical details, the learned representative sought to impress upon us that electroplating involved various complex processes and has to bs treated as a manufacturing process. He cited a number of authorities of various High Courts and the Tribunal. In fact, he has filed the detailed lost of them with the propositions which he wants to canvass with reference to these decisions.

4. The learned departmental representative, on the other hand, claimed that the technical opinion was with reference to the Factories Act which naturally seeks to give an extended meaning to the word 'manufacture' so as to bring within its scope a larger number of establishments. In fact, the Madras High Court in the case of CIT\.

Buhari Sons (P.) Ltd. [1983] 144 ITR 12 had pointed out that the definitions under the Factories Act would not be applicable where the issue involved is whether an assessee is an industrial company or not.

Hence, the position cannot be different for the purposes of investment allowance. He, therefore, contended that this could not be the basis of any conclusion. If it is argued that electroplating is a complex process, he contended that so was galvanising. In one the coating was with zinc while in other it could be with any other metal. Zinc is used for anti-corrosion while the other metals are used for shining or for some other such purposes. The product in either case continued to be the same. He, therefore, argued that it will not be open to us to ignore the decision of the Calcutta High Court which is nearest to the assessee's facts. He also sought to justify the order of the Commissioner on the basis of another argument. He pointed out that the basic material never belonged to the assessee. Its entire receipts are by way of service charges. He claimed that this distinction was noticed by the Bombay Tribunal in the case of ITO v. Ahura Shipping & Engg. Co.

(P.) Ltd. [1984] 8 ITD 435 wherein this Tribunal, according to him, excluded job works from the purview of 'investment allowance'. In this connection, he referred to the following passage from the above decision: ...The short question that arises for consideration, therefore, is whether or not the assessee-company manufactures or produces articles or things, there being no suggestion that the assessee is engaged in the business of construction. This has to be examined on the facts of the case, viz., that the assessee is mainly engaged in carrying out large scale repairs to ships though the job undertaken include manufacture or fabrication of parts, components and other equipments necessary for undertaking large scale repairs. In other words, just because the assessee, for and in the course of undertaking large scale repairs of ships, has to do fabrication and manufacture of certain items, it can be held that the assessee manufactures or produces articles or things. If we were to decide this issue on the basis of first principle, we would have straightaway held that the assessee does not manufacture or produce any article or thing, as, according to us, when a person manufactures or produces an article or a thing, it is implied that such articles or things are manufactured or produced for the purpose of sale and not for the purpose of some job work.

He contended that if the assessee's arguments were to be accepted, the persons who manufactured the products would be denied the benefit of investment allowance while the assessee to whom the goods did not belong would be allowed this deduction. This, according to him, would lead to anomalous result.

5. The learned counsel for the assessee, in reply, questioned the argument of the learned departmental representative that there is any anomaly involved a concession to the persons who virtually employs the manufacturing process by the help of machinery, labour and his own skill so as to produce a commercially different article. He pointed out to a decision of the Madras High Court in the case of CWT v. K. Lakshmi [1983] 142 ITR 656 which has laid down that the requirement is direct involvement in the manufacture. The assessee should employ his own labourers. If the manufacture is done by an outside agency, such an assessee cannot claim to be an industrial undertaking for the purpose of the Wealth-tax Act; 1957. He, therefore, contended that it could well be that the assessee is entitled to the investment allowance and not the persons for whose benefit he did the job work. As for his reliance under the Factories Act and sales tax decisions, he contended that it is not his case that those decisions will automatically apply for the income-tax purposes. But there is no reason why they should be brushed aside as being of no relevance. The decision of the Madras High Court relied upon by the learned departmental representative did not dismiss the claim based upon decisions on the Factories Act as totally inapplicable but distinguished them for the purpose of income-tax law.

He contended that the learned departmental representative did not make any such distinction besides merely brushing aside those decisions. As for the argument that the assessee has to do manufacturing on its own account, he claimed that this argument besides not having been raised in the order of the Commissioner is also weak. The remark made by this Tribunal in the case relied upon by the learned departmental representative was in the context of a repairer. There is no doubt that the assessee should be in the business of manufacturing goods. If he is not in that business, there cannot be any further question as to the eligibility of investment allowance. He pointed out to a Special Bench decision of the Madras Tribunal in the case of Thiagaraja Industries v.ITO [1983] 3 SOT 505 wherein this issue was specially considered. He also referred to some decisions of this Tribunal where such allowances have been granted to persons who did not own the goods themselves.

6. We have carefully considered the records as well as the arguments.

Both of us had occasion to consider what constitutes 'manufacture' in the case of Durandel Foods (P.) Ltd. v. ITO [1983] 6 ITD 207 (Hyd.) where we had observed as under: Fortunately, considerable guidance is available as to what constitutes manufacture. The statute itself does not define 'manufacture'. The Courts have pointed out that the word 'manufacture'has various shades of meaning and ordinarily involves application of some labour resulting in a final product which is commercially different from the article to which the labour was applied. An article is said to be commercially different if it has 'distinct character, name and use after the process to which it is subjected'. Sometimes, the article may remain the same, but it is commercially different, as for example, printed or dyed cloth from the cloth before it was printed or dyed. If a new form or quality is given to a per-existing article on application of hand labour or machinery, it may well amount to manufacture. A mere assembling of various parts to form a whole may constitute manufacture. Sometimes, a different quality may be ensured by mere process of goods. But, processing does not always mean that there is manufacture. While manufacture involves processing, processing by itself may not tantamount to manufacture. These are propositions on which there is really no dispute between the parties. These propositions emerge in a number of decisions of the Courts in matters of sales tax, central excise and income-tax law. We do not, therefore, consider it necessary to cite all the decisions cited by either party as to general principles as there is really no dispute on these matters.

It is agreed that mere processing cannot help a taxpayer to get investment allowance though it may be enough for some other reliefs under the statute.

8. The last of the cases dealing with definition of 'manufacture' was under the Transfer of Property Act, 1882 in the case of Idandas v.Ananta Ramchandra Phadke AIR 1982 SC 127 where the Supreme Court mentioned three tests as to what constitutes manufacture while holding that running a flour mill was used for manufacturing process under Section 106 of the Transfer of Property Act, 1882. The three tests were (0 a certain commodity should have been produced ; (ii) the process of production must involve either labour or machinery ; and (iii) the end product should have a distinct character, name and use. It quoted with approval a decision of the Calcutta High Court which pointed out that even a manufactured commodity may constitute a material for working it up into a different product, as for example, both a tanner and a shoemaker could be manufacturers though the material processed is one and the same. The Supreme Court also referred to the definition in Shorter Oxford English Dictionary laying stress on deployment of 'physical labour or mechanical power'.

As pointed out therein, though the principles as to what constitutes 'manufacture' is now well settled, there could still be dispute for application of these principles. The assessee is engaged in a business.

The sole activity constituting such business is electroplating services. It has installed expensive machinery and has skilled labour.

The only dispute is whether the product which is electroplated by the assessee could be considered as commercially different from the one before electroplating. The assessee has electroplated various Items of industrial and trade articles. It has electroplated spare parts for fan equipment, refrigerators, rickshaws, scooters, etc. No doubt, it has also electroplated items like safety pins, hair pins, etc.

Electroplating is not mere polishing or giving shine. Technical opinion irrespective of its conclusion has clearly pointed out that it involves various stages like degreasing, pickeling, polishing, cleaning, electro-degreasing, under-coating, electroplating and post-treatment with transparent plastic materials. It may be that galvanising is also a complex process to a larger or a lesser degree. But galvanising is more an anti-corrosion step to protect the metal while electroplating is done not only for avoiding corrosion but also for improving qualities like hardness, bearing, chemical resistance and adding the qualities of the metal which is used in the coating. While galvanisation is done with zinc, electroplating can be done with any metal though it is ordinarily done with copper, nickel, chromium, tin or even silver, or with a combination of these metals. However, the real test is whether a commercially different article would emerge as a result of electroplating. The Calcutta High Court in the case of Hindusthan Metal Refining Works (P.) Ltd. (supra) based on its decision that galvanisation did not involve a manufacturing process only because it found that there was no transformation of an article. It was treated as only a pxocess to protect the product from rust. The High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) observed as under: The expressions 'manufacture' or 'produce' are well-known expressions in fiscal legislation. The expression 'manufacture' is an expression very often considered in the cases dealing with Central Excise and sales tax matters. It has been held that the production or manufacture of goods involve bringing into existence new goods or articles known as such goods and articles in the market.

It concluded that the assessee was not entitled to be treated as an industrial undertaking on the following factual finding in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra): ...Galvanisation is an act or process of galvanising or coating to protect it from rust. This does not bring into existence a different article or an article commonly known to the people differently who deal with it before it was galvanised....(p. 476) It is the assessee's case that none of the articles which are electroplated could be treated to be commercially the same product as before electroplating. Many of the articles like refrigerator handles, hair pins, etc., are not sold in the market before electroplating. As for the industrial goods, such as scooter spare parts, electroplating is an essential process before they could be used as spare parts. He contended that these products cannot and are not sold in the form in which they were manufactured. The assessee had also produced a number of items which were electroplated by it and showed specimens before and after electroplating. We do find that the articles before electroplating could not, and to the best of our information, are not being sold and used for the purpose for which they are intended. If it were so, it naturally follows that electroplating is a process which transforms the materials which were given to the assessee for electroplating into something which is commercially different. As noted earlier, electroplating is a more elaborate process and it has varied uses. The items which are electroplated by the assessee are such as that they are not sold prior to electroplating. It is in this context, we must hold that the settled principles should apply to the assessee's case in its favour. We have found that the decision of the Calcutta High Court relied upon by the learned Commissioner is easily distinguishable for the reasons stated hereinbefore. The learned representative has cited a number of decisions. We do not consider it necessary to deal with all or some of them because manufacture of each item involves different products and the issue as to whether a commercially different commodity had resulted could be a matter of argument in each case. In the case of GST v. Radha Dyeing & Printing Mills [1981J 48 STC 61, it was held that the process of dyeing and printing would constitute manufacture for the sales tax purposes. In Hiralal Jeetmal v. CST [1957] 8 STC 325 (MP), it was observed that it is not necessary that there should be complete transformation of materials so as to constitute manufacture. This decision was followed by a Bangalore Special Bench in respect of investment allowance on an X-Ray plant in the case of First ITO v. Dr. P. Vittal Bhat [1983] 6 ITD 560. The Ahmedabad Tribunal in the case of Nishit Synthetics (P.) Ltd. v. ITO [1984] 7 ITD 486 held that conversion of a flat yarn into twisted yarn is manufacture on the same reasoning as adopted in this case. There is also an other decision where conversion of a plain cloth into a saree with printing was treated as manufacture in the decision of the Bombay Bench of this Tribunal at p. 22 of April 1982 issue of Taxes and Planning. A single product may require more than one manufacturer before it goes to the consumer. It is not necessary that there should be one manufacturer for one article. As long as there is a transformation at each stage, which makes the article commercially different from the earlier stage, there is manufacture. The Madras High Court in the case of CIT v. Perfect Liners [1983] 142 ITR 654 was of the view that the word 'manufacture' in the context of development rebate has to be understood in a wide sense. Where all that the taxpayer was doing was polishing rough castings so that such polished rough castings could be utilised for internal combustion engines, he could be treated as a person engaged in manufacture. Reasoning again was that polishing was equivalent to manufacture because the resultant product was different. In coming to his conclusion, the High Court followed its earlier decision in CIT v. M.R. Gopal[1965] 58 ITR 598 (Mad). Rationale of these two decisions is that where labour and: machinery are used for converting one product into a commercially different one, there was manufacture. This Tribunal in the case of Durandel Foods (P.) Ltd, (supra) considered even a packing process as constituting manufacture in the facts , and circurn-stances of the case because the bulk product .before packing was not commercially sold while the packing involved, a,complex process with the aid of machinery and labour. On the, basis, of our finding that electroplating involved transformation of the product before electroplating into a commercially different one, we must hold that the assessee's claim on merits is justified and was, therefore, rightly allowed by the ITO.7. We have yet to deal with another argument which was raised by the learned departmental representative during the hearing. No doubt, the Bombay Bench of this Tribunal in the case of Ahura Shipping & Engg. Co.

(P.) Ltd. (supra) had observed that job works may not qualify for treatment as manufacture. But that observation was made in the context of a repair works. In the case of repair, the question of manufacturing any new article does not arise. By the very nature of a business, it has to be a job work and job work alone. Hence, the question whether it was done on own account or on somebody else's account was not an issue that could have arisen in that case. Actually, this issue was squarely considered by the Special Bench in the case of Thiagaraja Industries (supra). The Special Bench pointed out that the requirement that the assessee should own the raw materials is a novel one and is not contemplated by the statute. While the law is clear that the machinery should be owned by the assessee, there is no requirement that the raw materials used in the manufacture should also be owned by the assessee.

In coming to this decision, the Special Bench followed an order of the Tribunal in an earlier case referred to therein. Again, the question whether a manufacturer on his own account should get the deduction or whether the person who does the job work should get it is also not quite relevant. Only the person who owns the machinery and uses it for his business would get the deduction. Even as pointed out in the immediately preceding paragraph, it is possible that more than one person would get the benefit of deduction if two or more such persons contribute to the manufacture of the product with their own machinery, labour and organisation independently transforming the product at each stage into a commercially different one. The Madras Tribunal in the case of First Leasing Co. of India Ltd. v. ITO [1983] 3 ITD 808 had pointed out that the entire scheme of investment allowance has been spelt out in Section 32A of the Act and that the only requirements are (i) that the machinery must be owned by the assessee ; (ii) it must be used for the assessee's business, and (iii) it must be one which is specified under Section 32A(2), i.e., it must be used for the manufacture or production of any article or a thing. It is clear that all the three conditions are satisfied in this case when once we have found that after electroplating, a commercially different article emerges. Since investment allowance is in relation to the machinery it has hardly anything to do with the ownership of the raw materials involved in the article. The learned departmental representative tried to say that it is difficult to envisage a person who does merely a job work as a manufacturer. The assessee's unit is registered as a factory under the Factories Act. It is registered as a small-scale unit in the department of industries as is evident from a registration certificate dated 13-2-1979 a photostat copy of which has been filed. Against the column 'manufacturing or processing activity', it has been indicated that the assessee's activity is 'job works in electroplating'. It has also been stated that the date of commencement of production is '1-11-1978'. We do find that both sales tax and central excise law would consider that a person owning the machinery and using the labour for manufacturing process would be considered as a manufacture. Section 2(f) of Central Excises and Salt Act, 1944, defines 'manufacture' and 'manufacturer' as under: (f) 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product ; and (f) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; (ia) in relation to manufactured tobacco includes the labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer ; (ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling or any one or more of these processes, the separation or purification or salt obtained in the manufacture or saltpetre, the separation of salt from earth or other substance so as to produce elementary salt; and the excavation or removal of natural saline deposits or efflorescence ; (iii) in relation to patent or proprietary medicines as defined in Item No. 14E of the First Schedule and in relation to cosmetics and toilet preparations as defined in Item No. 14F of that Schedule, includes the conversions of powder into tablets or capsules, the labelling or relabelling of containers intended for consumers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer ; (iv) in relation to goods comprised in Item No. 18A of the First Schedule, includes sizing, beaming, warping, wrapping, winding or reeling, or any one or more of these processes, or the conversion of any form of the said goods into another form of such goods ; (v) in relation to goods comprised in Item No. 19-1 of the First Schedule, includes bleaching, mercerising, dyeing, printing, waterproofing, rubberising, shrink-proofing, organdie processing or any other process or any one or more of these processes ; (vi) in relation to goods comprised in Item No. 21(1) of the First Schedule, includes milling, raising, blowing, tentering, dyeing or any other process or any one or more of these processes ; (vii) in relation to goods comprised in Item No. 22(1) of the First Schedule, includes, bleaching, dyeing printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any one or more of these processes ; and (viii) in relation to aluminium, includes lacquering or printing or both of plain containers ; and the word 'manufacturer' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account ; By the above definition, the process employed by the assessee would be manufacture and the assessee would be a manufacturer. In fact, it has been held by the Allahabad High Court in Gangadhar Ramdhandas v.Collector of Central Excise 1979 ELT (J) 597 and the Andhra Pradesh High Court in Andhra Re-Rolling Works v. Union of India 1979 ELT (J) 600 that the person who carries on manufacturing activity and not the person who supplied the raw materials to the person who will be liable for the excise duty as a manufacturer. But as pointed out by the learned departmental representative, the definition under the Factories Act or other Acts cannot be automatically imported because what is required is that the popular and generally understood meaning of the word should be considered and not the special meaning given in a special statute. We are, however, citing the provisions of central excise law and the decisions thereunder to show that the concept of manufacturer under the Central Excise Act, primarily includes a person who employs hired labour in the production or manufacture of excisable goods and only on an extended meaning, a person who manufactures 'on his own account' is sought to be included. In other words, a person on whose behalf manufacturing is done, may also be treated as a manufacturer by an extended meaning given to the word 'manufacturer' under central excise law. The ordinary meaning of manufacturer refers to the person who does the actual manufacture whether he does it on his own account or on somebody else's account. We are of the view that the general meaning assigned to manufacturer does not require that the manufacturing should be done by that person on his own account even as held by the Special Bench. The case before the Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra), a decision relied upon strongly by the Commissioner and the learned departmental representative for their arguments by comparing galvanising to electroplating, was also a case of job work inasmuch as galvanising work was done 'for outsiders'. But the decision did not turn on this fact but on the fact that galvanising did not bring out a commercially different product. In the case of Durandel Foods (P.) Ltd. (supra), this Tribunal was again dealing with a case of packing done or some other person's goods. Hence, we do not think that the point now sought to be made out by the learned departmental representative would justify the order of the Commissioner.

8. In any view of the matter, the assessee's appeal deserves to succeed. The order of the Commissioner is set aside and that of the ITO is restored.

1. In this case, I have read the order proposed by my learned brother, Shri S. Rajaratnam, Accountant Member. I am unable to agree with him in his conclusions. Firstly, this Tribunal Bench 'B' by its order passed in Deepak Galvanising & Engg. Industries v. ITO [IT Appeal Nos. 1015 and 1063 (Hyd.) of 1982, dated 18-6-1983] took the view that galvanising did not involve manufacture or production of any article and an assessee engaged in galvanising was not an industrial undertaking. Here, in this case, no doubt, an argument was advanced on behalf of the assessee-company that the process of galvanising is different from electroplating. According to my learned brother, galvanising is more an anti-corrosive step to protect the metal, whereas electroplating is done not only for avoiding corrosion but also for improving the qualities like hardness, chemical resistance and adding the qualities of the metal which is used in the coating. Whereas galvanising is done with zinc, electroplating can be done with any metal though it is ordinarily done with copper, nickel, chromium, tin or even silver or with combination of these metals. According to my learned brother, a thing upon which electroplating was done was a commercially different product than the thing in its original shape. I am unable to agree with this conclusion. For instance, if nuts, bolts and hair pins were electroplated, they remain as they are and they go only by the name of nuts, bolts and hair pin. So also the ceiling fan bottom cup, 48" fan guard's outer rings, refrigeration handle, rickshaw parts, gas stove frames, Icickstarter pedaj, carriers grush guards bear their names before they are electroplated and they are being used as subsidiary parts in certain machines gadgets in which they are used.

Take, for instance, kick pedal. If the pedal is made with iron or steel or if it is electroplated the use to which it is put is only as a pedal. It is a different thing to say that the pedal looks nice, lasts longer, etc., if it is electroplated. But to say that after a particular part in a gadget is being electroplated, it becomes a separate identifiable product and is quite different from its original existence or identity does not appear to me to be correct. Further, the opinion of the Andhra Pradesh Industrial Technical Consultancy Organisation Ltd. is filed to show that the 'manufacturing process' includes 'ornamenting'. However, the definition of manufacturing process was taken from the provisions of the Factories Act. The learned departmental representative before us cited the decision of the Madras High Court in Buhari Sons (P.) Ltd.'s case (supra) on the basis of which he argued that the definitions under the Factories Act would not be applicable where the issue involved is whether an assessee is an industrial company or not. 1 am unable to find any good ground on which this decision of the Madras High Court is distinguished, in the order of my learned brother. Further in the technical opinion report furnished from p. 12 to 16 of the paper compilation the meaning giyen to the galvanising process was stated to have been extracted from Encyclopaedia Vol. 3, Eighth Chapter (Metals and Ores), p. 303 covering metals and their technology, whereas, while describing the process of electroplating no such authority was quoted. Therefore, I am not able to understand whether the process of electroplating given in the technical opinion report is backed by any such authority as was given while describing the process of galvanising.

2. Further, while granting certificate and recognising the assessee is a small-scale industry by the department of industries, the assessee is stated to be purely engaged in 'job works in electroplating'. So there is no denying the fact that the assessee is engaged in only job works for others. It does not manufacture its own products and it won't sell any products manufactured by it in open market. In my understanding, the assessee-company sells its services of electroplating. It is no doubt true that in the process, for instance, it was in receipt of Rs. 88,470.91 for which it had to incur direct expenses and prime cost of the metals consumed for electroplating at Rs. 59,774.56 which works out to 67.56 per cent. However, the above figures do not alter the fundamental character of the business carried on by the assessee. The fundamental character of the business of the assessee is that the goods manufactured by it are not directly sold in the market. One of the Tribunal decisions on which reliance is placed by the learned departmental representative was the decision in Ahura Shipping & Engg.

Co. (P.) Ltd.'s case (supra) wherein the head-note of the decision it is held as follows: "When a person manufactures or produces an article or thing, it is implied that such articles or things are manufactured or produced for the purpose of sale and not for some job work. In the instant case, the assessee was mainly engaged in carrying out repairs to ships, though the job undertaken included manufacture or fabrication of parts, components and other equipment necessary for undertaking such repairs. Merely because the assessee had to, for and in the course of undertaking repairs of ships, fabricate and manufacture certain items, it could not be held that the assessee manufactured or produced articles or things. On the basis of first principle, therefore, the assessee could not be said to manufacture or produce any article or thing." In my understanding of the abovesaid order, it lays down a principle that if a person manufactures or produces articles or things in execution of his job work, then he should not be taken to be a manufacturer or producer of the said articles or things. At paragraph No. 7 of my learned brother's order, the decision of the Bombay Tribunal referred to above was sought to be distinguished. I am not able to make out how it was successfully distinguished. Without saying that it went against the Special Bench decision in Thiagaraja Industries' case (supra) my learned brother appeared to have derived support from the Special Bench decision in Thiagaraja Industries' case (supra) rather than from Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra). Whatever that may be said, the decision in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) in my opinion, directly covers the facts of the present case and so following the said decision, in my opinion, the relief of investment allowance under Section 32A should have been denied to the assessee. However, my learned brother allowed the appeal and also conceded the investment allowance to the assessee.

For the abovesaid reasons, I am unable to accept his order. In my opinion, according to the abovesaid reasoning of mine the investment allowance sought for by the assessee-company should have been disallowed and according to me the appeal should have been dismissed instead of being allowed.

REFERENCE UNDER Section 254(4) OF THE NCOME-TAX ACT, 1961 Since, there was a difference of opinion of the following point between the Members who heard the appeal, we refer the point to the President through the Vice President for hearing by a Third Member: Whether, on the facts and in the circumstances of the case, the assessee whose business is doing job works in electroplating is entitled to its claim of investment allowance of Rs. 35,898 on its investment on machinery at Rs. 1,43,593 ?" 1. There being difference of opinion between the learned Members of the Tribunal, Hyderabad, the following question has been referred to me for resolving the controversy: Whether, on the facts and in the circumstances of the case, the assessee whose business is doing job works in electroplating is entitled to its claim of investment allowance of Rs. 35,898 on its investment on machinery at Rs. 1,43,593 ?" 2. The assessee-company carries on business in electroplating and undertakes job works for others. For the assessment year 1979-80, the ITO allowed the claim of the assessee for investment allowance amounting to Rs. 35,898 under Section 32A. Subsequently, the Commissioner was of the view that the assessee did not carry on the business of 'manufacture' of articles within the meaning of Section 32A(2)(b)(iii). He observed that the process of'manufacture' involved some transformation or change in the material as a result of application of art or mechanical manipulation. He referred to the decision of the Supreme Court in the case of Dy. CST v. Pio Food Packers [1980] 46 STC 63. According to this authority, the test that was required to be applied was whether the processing of the original commodity brings into existence a commercially different and distinct article ; if it does, it is a process of manufacture, otherwise it does not amount to manufacture. The Commissioner then observed that there were numerous decisions in favour of and against the contention of the assessee-company that the process carried on by it amounted to manufacture. He, however, considered the decision of the Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) as most relevant to the present case. According to this decision of the Calcutta High Court, 'galvanising' was not a process of manufacture and did not result in the manufacture of new goods. The Commissioner remarked that galvanising involved the process of coating iron or steel with zinc to protect the material from rust, that electroplating also involved the process of coating one material with another by electric treatment and, hence, these processes were similar in character. He, therefore, held that the order of the ITO allowing the claim of the assessee for investment allowance under Section 32A was erroneous and prejudicial to the interests of the revenue. He, accordingly, set aside the assessment under Section 263 of the Act and directed the ITO to withdraw the investment allowance already allowed to the assessee.

3. Aggrieved by the order of the Commissioner the assessee went in appeal before the Tribunal. After hearing the parties, the learned Members of the Tribunal could not come to an agreed conclusion.

4.1 The learned Accountant Member accepted the contention of the assessee-company that it was engaged in the business of 'manufacture' of articles within the meaning of Section 32A(2)(b)(iii). He observed that 'electroplating', according to the technical opinions, involves various stages like degreasing, pickeling, polishing, cleaning, electro-degreasing, under-coating and treatment with transparent plastic materials. According to him, galvanising was more an anti-corrosive step to protect the material whereas electroplating was done not only for.avoiding corrosion but also for improving qualities like hardness-bearing, and chemical resistance, etc. Further, while galvanizing was done with zinc, electroplating could be done with any metal though it was ordinarily done with copper, nickel, chromium, tin or even silver or with combination of these metals. Thus, according to the learned Accountant Member, the process of galvanising and electroplating were different and so, the decision of the Calcutta High Court in the case of Hindusthan Metal Refining Works (P.) Ltd. (supra) did not clinch the issue in the present case. He further observed that the real test was whether a commercially different article would emerge as a result of electroplating. On this point, he remarked that many of the articles like refrigerator handles and hair pins, etc., were not sold in the market without electroplating, that for certain industrial goods like scooter spare parts, electroplating was an essential process before they could be used as spare parts and that the articles which are electroplated could not and were not sold in the form in which they were originally manufactured. The learned Accountant Member, therefore, concluded that electroplating was a process which transformed the materials into certain articles which were commercially different and, hence, the assessee was engaged in the 'manufacture' of articles as contemplated by the Supreme Court in Idandas v. Anant Ramchandra Phadke AIR 1982 SC 127 and as held by the Tribunal in Durandel Foods (P.) Ltd.'s case (supra). In support of his conclusion, he also relied upon the authorities in Radha Dyeing & Printing Mills case (supra), Hiralal JeetmaVs (supra), Dr. P. Vittal Bhat's case (supra) and Nishit Synthetics (P.) Ltd.'s case (supra). Referring to the decision of the Madras High Court in Perfect Liners' case (supra) and M.R. GopaVs case (supra), he remarked that the word 'manufacture' should be understood in a wide sense and so where labour and machinery were used for converting one product into a commercially different one, there was 'manufacture'.

4.2 Another argument of the learned departmental representative before the Bench was that since the assessee-company was engaged in job works, it did not qualify for being treated as manufacturer. In this behalf, he relied upon the decision of the Tribunal in the case of Ahura Shipping & Engg. Co. (P.) Ltd. (supra). The learned Accountant Member rejected this argument. Referring to the decision of the Special Bench of the Tribunal in Thiagaraja Industries' case (supra) he observed that, for claiming investment allowance, the law simply requires that the machinery should be owned by the assessee ; it was not necessary that the raw materials used in the manufacture should also be owned by the assessee. He further referred to the decision of the Tribunal in the case of First Leasing Co. of India Ltd. (supra) according to which the only requirements for claiming investment allowance under Section 32A were that (i) the machinery should be owned by the assessee, (ii) it must be used for the assessee's business, and (iii) it must be used for the manufacture of articles specified in Section 32A(2). According to the learned Accountant Member, all these conditions were satisfied in the present case. He also took note of the definition of 'manufacturer' in Section 2(f). According to this definition, the word 'manufacturer' included not only a person who employed hired labour in the production or manufacture of excisable goods, but also any person who engages himself in their production or manufacture on his own account. The learned Accountant Member observed that the concept of 'manufacturer' under the Central Excise Act primarily includes a person who employs hired labour in the production or manufacture of excisable goods and it is only on an extended meaning that a person who manufactures 'on his own account' is sought to be included in the definition of 'manufacture'. Thus, according to him, the ordinary meaning of 'manufacturer' would refer to a person who does the actual manufacturing whether he does it on his own account or on somebody else's account. He rejected the argument of the department that the definition given in the Central Excise Act or the Factories Act could not be considered even 'relevant' for the purpose of deciding the point at issue.

4.3 Accordingly, the learned Accountant Member was of the opinion that the assessee-company was entitled to investment allowance under Section 32A.5. The learned Judicial Member did not agree with the learned Accountant Member. He referred to the decision of the Tribunal in the case of Deepak Galvanising & Engg. Industries (supra), wherein it was held that the business of galvanising did not involve manufacture or production of any article. He was of the view that the process of galvanising was not different from electroplating and, as such, the aforesaid decision applied to the present case. He further observed that the nuts, bolts and hair pins, refrigeration handles, rickshaw parts, gas stove frames and other articles remained the same even after electroplating and, as such, it could not be said that new and commercially different and distinct articles would come into existence after electroplating so as to accept the proposition that electroplating was a manufacturing process. He referred to the decision of the Madras High Court in the case of Buhari Sons (P.) Ltd. (supra) and observed that the definitions of various expressions under the Factories Act or the Central Excise Act would not be applicable where the issue involved was whether an assessee was an industrial company or not. The learned Judicial Member was further of the view that the assessee-company was engaged only in 'job works in electroplating' for others, that it did not manufacture and sell its own products and, as such, it was not entitled to investment allowance. According to him, the fact that direct expenses and prime cost of the metals consumed for electroplating amounted to Rs. 59,774 and constituted 67.56 per cent of its receipts amounting to Rs. 88,470 did not alter the fundamental character of the business carried on by it. He relied upon in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) and held that if a person manufactured or produced articles or things in execution of his job work, then he could not be considered as a manufacturer or producer of the said articles or things. According to him, the decision of the Special Bench of the Tribunal in Thiagaraja Industries' case (supra) did not overrule the decision of the Tribunal in Ahura Shipping & Engg.

Co. (P.) Ltd.'s case (supra). He, therefore, concluded that the assessee-company was not entitled to investment allowance under Section 32A.6. It is against this background that the point at issue has been referred to me for decision as a Third Member.

7. Before me, the learned representative of the assessee reiterated the reasons advanced by the learned Accountant Member to substantiate his case. Similarly, the learned representative of the department relied upon the reasoning of the learned Judicial Member in support of his point of view. It will be unnecessary to repeat their arguments in details. Suffice it to say that the orders of the learned Accountant Member and the learned Judicial Member aptly summarise the respective cases of the parties.

8. After going through the record and hearing the learned representatives of the parties, I am inclined to agree with the learned Accountant Member.

9. The crucial question for consideration is whether the assessee-firm who undertakes job works in electroplating is entitled to investment allowance under Section 32A(1). According to Section 32A(2)(b)(iii), an industrial undertaking will be entitled to investment allowance under Section 32A(1) if the new machinery or plant is installed after 31-3-1976 for the purpose of business of construction, manufacture or production of an article or thing not being an article or thing specified in the list in the Eleventh Schedule of the Act. The main point of difference between the parties hinges on the question whether electroplating tantamounts to 'manufacture' or 'production' of an article or thing within the meaning of Section 32A(2). Now, the expressions 'manufacture' and 'production' have not been defined anywhere in the Act. So, for solving the problem, we have to seek the aid of other authorities.

The process or operation of making goods or any material produced by hand, by machinery or by other agency ;...The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine.

(a) to make or fashion by hand or machinery, (b) to work into useful form, (c) to produce in a mechanical way, (d) to produce goods by hand or by industrial art or processes, etc.

(iii) The expression 'production' is defined by the aforesaid dictionaries as (a) an act or process of producing, and (b) any tangible result of industrial, artistic or literary labour.

(iv) According to the decision of the Supreme Court in Idandas's case (supra) there are three tests for determining whether a particular process amounts to 'manufacture'. They are: (a) a certain commodity should have been produced, (b) the process of production must involve either labour or machinery, and (c) the end product should have a distinct name, character or use.

(v) In Joyanti Hosiery Mills v. Upendra Chandra Das AIR 1946 Cal. 317, the Supreme Court observed as under: ...To manufacture, according to its Dictionary meaning, means to 'work up materials into forms suitable for use'. The word 'material' does not necessarily mean the original raw material, for a finished article may have to go through several manufacturing processes before it is fit and made ready for the market. What is itself a manufactured commodity may constitute a 'material' for working it up into a different product.... (p. 318) (vi) The Kerala High Court in the case of CIT v. Casino (P.) Ltd. [1973] 91 ITR 289 has held as follows: "The term 'manufacture or processing of goods' has not been defined by the Finance Act, 1968. In its ordinary meaning 'manufacture' is a process which results in an alteration or change in the goods which are subjected to such manufacture. A commercially new article is produced. The production may be by manual force, mechanical force or even by nature's own process such as drying by heat of the sun as in a salt pan. The real test is to see whether a commodity which in a commercial sense is different from the raw materials has resulted due to the manufacture....(p. 289) (vii) Then, the Bombay High Court has brought out the distinction between the wider and narrower connotation of the word 'manufacture' in the case of CIT v. Tata Locomotive & Engg. Co. Ltd. [1968] 68 ITR 325.

This authority lays down as follows: "The word 'manufacture' has a wider and also a narrower connotation.

In the wider sense it simply means to make, or fabricate or bring into existence an article or a product either by physical labour or by power, and the word 'manufacturer' in ordinary parlance would mean a person who makes, fabricates or brings into existence a product or an article by physical labour or power. The other shade of meaning, which is the narrower meaning, implies transforming raw materials into a commercial commodity or a finished product which has an entity by itself, but this does not necessarily mean that the materials with which the commodity is so manufactured must lose their identity. Thus, both the words 'manufacture' and 'produce' apply to the bringing into existence of something which is different from its components.... (p. 325) 11. Let us now examine, in the light of the aforesaid authorities, whether electroplating falls within the definition of 'manufacture' or 'production' of articles. Before determining that issue, we may first understand the process of electroplating. As explained by the counsel for the assessee, this process comprises the following stages:Degreasing Removal of oils, grease and other surface contamina- tion to make it suitable for pickeling involving alka- line chemicals.Pickeling Process for chemical treatment where various metals are treated with different acidic solutions to remove metallic salts (example: iron is treated to removePolishing A mechanical process also called buffing by which the metal is made soft at the surface to attain aCleaning Process to remove oils left during polishing.Electro-degreasing Process for removing oils and grease left in cleaning by using current.Under-coating Electro-depositation of a metal cheaper than the one being finally deposited for better conductivity for the final plating process.Electroplating Electro-deposition of the required metal by way of electrolysis.Post-treatment A process of coating the finished product with films of transparent plastic to protect it.

12. It is evident that electroplating involves various processes, namely degreasing, picketing, polishing, cleaning, electro-degreasing, under-coating, electroplating and post-treatment, etc. The crucial question for consideration is whether the article, after electroplating, retains its old shape or undergoes a transformation. It is common knowledge that an article, before electroplating, is nearly a junk whereas it is an entirely new article with a shining surface and different qualities after electroplating. Before electroplating, the article is almost worthless whereas the same, after electroplating, is a valuable commercial commodity. For instance, a spoon, before electroplating, may not have any value whatsoever, whereas the same, after electroplating, may be used by a Five Star Hotel. Thus, an article, after electroplating, has a different look, different shape and different value, with * different qualities as to corrosion resistance, hardness and durability, etc. The end product, which has a distinct character, shape and use, is achieved by the employment of labour and machinery. Thus, in my opinion, electroplating involves 'manufacture' or 'production' because an electroplated article is a new entity by itself, different from the old one, in the commercial sense.

13.1 My view derives support from the following decisions of the High Courts: (a) In CIT v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811, it was held by the Gujarat High Court that the business of printing balance sheets, profit and loss accounts, dividend warrants, pamphlets, share certificates, etc., was a business which consisted wholly of 'manufacture of goods' within the meaning of Clause (ii) of Explanation 2 to Section 23A of the Indian Income-tax Act, 1922.

(b) In the case of Burmah Shell Refineries Ltd. v. G.B. Chand, ITO [1966] 61 ITR 493, it was held by the Bombay High Court that the companies engaged in refining crude oil were companies engaged in the 'manufacture' or 'production' of mineral oil.

(c) The processing of seeds has been held to be a process of manufacture or production for the purpose of Section 80J of the Act in the case of Tarai Development Corpn. v. CIT [1979] 120 ITR 342 (All.).

(d) According to the decision of the Madras High Court in Perfect Liner's case (supra), the polishing of rough castings and supplying them for use as component parts in internal combustion engines amounts to manufacture of such components.

(e) In the case of Hiralal Jeetmal (supra), the Madhya Pradesh High Court held that a person who was engaged in the business of printing and dyeing textiles purchased by him and of sale and supply of the printed and dyed material was a 'manufacturer'.

13.2 I may also refer to the following decisions of the Tribunal in support of the view I have taken: (a) In ITO v. Elite Sea Foods [1983] 3 ITD 348 (Coch.), it was held that the assessee was entitled to get investment allowance on plate freezer used for freezing shrimps purchased and processed before export.

(b) In Andhra Pradesh State Seeds Development Corpn. v. ITO [1983] 5 ITD 624 (Hyd.), the assessee purchased seeds from agriculturists and processed them by cleaning, grading, preserving and treating them through scientific conditions. The Tribunal held that the process amounted to 'manufacture' or 'production' for claiming weighted deduction under Section 35C of the Act.

(c) In the case of Durandel Foods (P.) Ltd. (supra), the assessee-company was engaged in packing, in bottles, malted milk food for another company which supplied malted milk food in bulk.

The Tribunal held that though the operation involved was only of unpacking of drums and packing the contents in bottles, such operation resulted in production of a commercially different article and, hence, the same tanta-mounted to 'manufacture' or 'production' within the meaning of Section 32A. (d) In Dr. P. Vittal Bhat's case (supra), it was held by the Tribunal that when a raw film was exposed and processed, the X-ray photographs were produced and the operation tantamounted to 'manufacture' or 'production' for the purpose of Section 32A. (e) According to the decision of the Tribunal in Nishit Synthetics (P.) Ltd.'s case (supra), the conversion of flat yarn into twisted yarn would amount to 'manufacture' for the purposes of Sections 32A and 80J. (f) In ITO v. Maddi Satyanarayana & Co. (P.) Ltd. [1984] 8 ITD 249 (Hyd.), the Tribunal held that conversion of fluecured tobacco into redried tobacco involved 'manufacture' for getting relief under Section 80J. (g) According to the decision of the Special Bench of the Tribunal in the case of Sixth ITO v. General's New Tread [1985] 13 ITD 460 (Bang.), the retreaded tyre is an article produced by an assessee and, therefore, the machinery employed in retreading of tyres is entitled to investment allowance under Section 32a.

13.3 In view of the aforesaid decisions, I would hold that electroplating involves 'manufacture' or 'production' of a new article, in the commercial sense. It may be mentioned at the cost of repetition that the cases in Burmah Shell Refineries Ltd.'s case (supra), Tarai Development Corpn.'s case (supra), Perfect Liners' case (supra), Andhra Pradesh State Seeds Development Corpn.'s case (supra), Nishit Synthetics (P.) Ltd.'s case (supra) and GeneraVs New Tread's case (supra) are very close to the facts of the present case. If (i) refining of crude oil, (ii) processing of seeds, (iii) polishing of rough castings, (iv) conversion of flat yarn into twisted yarn, and (v) retreading of tyres could be considered as 'manufacture' or 'production', there is absolutely no good reason why electroplating should not be so considered.

14. The definition of the expression 'manufacturing process' as given in the Factories Act, also advances the case of the assessee. According to this definition, 'manufacturing process', inter alia, includes 'any process for making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adopting any article or substance with a view to its use, sale, transport, delivery or disposal, etc' When even 'ornamenting' can be considered to be manufacturing process, there is no good reason to give a different treatment to electroplating. The argument of the learned representative of the department that the definition of 'manufacturing process' as given in the Factories Act, should not be taken into consideration while deciding the present case is not acceptable. This definition may not be conclusively decisive of the point at issue, but there is no bar in seeking guidance from the same.

15. We may examine the case from another angle. What is the rule of construction of statute the object of which is to encourage industrialisation According to the decision of the Punjab High Court in Webbing & Belting Factory (P.) Ltd. v. CIT [1961] 43 ITR 234 at p.

238, a provision which is intended to encourage the setting up of new industrial enterprises must be construed liberally. Similarly, it has been held by the Gujarat High Court in CIT v. Satellite Engg. Ltd. [1978] 113 ITR 208 that if the principal object of a provision is to encourage setting up of new industrial undertakings by offering tax incentives and to give fillip to trade and industry, then the interpretation of such a provision must be in consonance with the avowed aim and object of the Legislature and not such as would defeat the same. To the same effect is the view taken by the Calcutta High Court in CIT v. Orient Paper Mills Ltd. [1974] 94 ITR 73. I may also refer to the following observations of the Supreme Court in Idandas's case (supra): ...We might state that in the present set up of our socialistic pattern of society when our country has made strong strides in various spheres of industrial activities an industrial venture must be given the most liberal interpretation so as to subserve the object of the statute.... (p. 128) In view of the aforesaid authorities, there is no good reason why a wider meaning should not be given to 'manufacture' or 'production' so as to cover electroplating when the object of Section 32A is to give fillip to industry.

16. I may now distinguish the decision of the Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) which is strongly relied upon by the representative of the department in support of his case. In this case, the assessee carried on business in 'galvanising' metal on behalf of its customers. The High Court held that this did not involve 'manufacture' or 'production' within the meaning of Section 84(2)(iii) of the Act. According to the learned representative of the department, this authority should be followed to hold that electroplating does not involve 'manufacture' or 'production' of article. I am unable to agree with him for the simple reason that there is a marked difference between 'galvanising' and 'electroplating'. This would be evident from the opinion of the technical expert produced by the assessee. According to the 'Technical Opinion Report' of the Andhra Pradesh Industrial & Technical Consultancy Organisation Ltd., 'galvanising' is a process of 'providing a coating of zinc on iron or steel to protect it from corrosion only, and zinc coatings are used for the protection of finished products ranging from structural steel works for buildings and bridges to nuts, bolts, strip, sheet, wire and tube etc' [Emphasis supplied] As against this, 'electroplating', according to the aforesaid technical opinion report, means 'deposition of one metal on another by electrolytic action on passing a current through a cell, for decoration, or for protection from corrosion, etc., metal is taken from the anode and deposited on the cathode, through a solution containing the metal as an ion'. [Emphasis supplied] It may not be out of place to mention here that, according to Encyclopedia of Chemical Technology, Vol. 8 by Raymond E. Kirk and Donald F. Othmer, new and important qualities in decoration, surface protection and engineering performance are attainable for many electroplated articles and electro-deposition frequently offers the only method of manufacturing or producing the desired surface finish. The beneficial results of electroplating may include improved appearance, improved resistance to corrosion, tarnish, chemical attack, and wear, improved frictional and non-galling behaviour, and increased hardness. Thus, whereas 'galvanising' is used for applying coatings of zinc on other metals to protect it from corrosion only, 'electroplating', besides increasing the resistance to tarnish or corrosion, changes the very properties and dimensions of the surface of the metal. [Emphasis supplied] Electroplating may be used even to increase the dimension of worn or undersized articles. (See McGraw-Hill Encyclopedia of Science and Technology/G/GAB-HYS at p.

601.) Thus, there being a pronounced difference between 'galvanising' and 'electroplating', the authority in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) does not directly cover the present case.

Since there is no direct authority to decide whether 'electroplating' involves 'manufacture' or 'production' of articles, I would rely upon the string of authorities of the High Courts and the Tribunal referred to above in preference to the decision of the Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) and take a broader view in the matter.

17. The last argument of the learned representative of the department is that the assessee is not entitled to investment allowance under Section 32A because it undertakes only job works. In this behalf, he relies upon the decision of the Tribunal in Ahura Shipping & Engg. Co.

(P.) Ltd.'s case (supra). The argument of the learned representative of the department is not acceptable for the simple reason that the decision of the Division Bench of the Tribunal in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) cannot be followed in preference to the decision of the Special Bench of the Tribunal in Thiagaraja Industries' case (supra). While dealing with a case under Section 80J, the Special Bench of the Tribunal observed in Thiagaraja Industries' case (supra) that Section 80J does not require that the assessee must not only manufacture or produce articles but should also own the same.

According to the Special Bench, what is important is the manufacturing process and not the ownership of the articles which are manufactured.

On a parity of reasoning, it can be safely said that for claiming investment allowance under Section 32A, all that is necessary is that the machinery should be owned by the assessee and the same should be used for the business of the assessee. It is not necessary that the raw materials in the manufacture or production of the articles should also be owned by the assessee. In this view of the matter, the mere fact that the assessee-company undertakes job works is not fatal to its claim for investment allowance provided the other conditions of Section 32A are satisfied. I would, therefore, reject the argument of the learned representative of the department in this behalf.

18. In view of the above discussion, I conclude that the assessee-company which carries on the business of electroplating and undertakes job works in electroplating is entitled to investment allowance under Section 32A.19. I would, therefore, agree with the learned Accountant Member and answer the question referred to me in the affirmative.

20. The case will now go to the Bench for disposal according to the majority view.


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