Law:

Section:

Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1986-87 - Assessee was trading in photographic colour papers as wholesaler and slitted already manufactured and produced photographic papers' into required size to suit requirement of its customers and in easily marketable sizes - Whether even though goods were handled and slitted using sophisticated machineries and scientific methods, neither manufacture nor production was involved nor a new product emerged - Held, yes FACTS The assessee was a dealer in photographic colour papers. It imported photographic colour papers in jumbo rolls. After cutting same in photographic flats and rolls of desired size in a dark air-conditioned humidity controlled dust proof room with the help of slitting machine, it sold small rolls and cut sizes. The assessee claimed the process involved as manufacture/production of an article and, hence, claimed investment allowance under section 32A and deduction in respect of profit and gains under section 80-I. The Assessing Officer opined otherwise and disallowed the assessee's claim. On appeal, however, the Commissioner (Appeals) accepted the assessee's contention and allowed his claims. On further appeal, the Tribunal disallowed the claims. On reference : HELD A cursory reading of section 32A would indicate that the plant and machinery should be used by an industrial undertaking for the purpose of business of manufacture or production of any article or thing, as stated in section 32A(2)(b)(ii ). As set out in the statement of the case, the assessee was not a manufacturer, but only a dealer in photographic colour paper, who imported manufactured or produced photographic colour paper for the purpose of sale. In the instant case, the assessee by the use of slitting machine slitted the jumbo photographic colour paper into smaller rolls and cut size flats of the desired size. By this activity, no manufacturing process had been done by the assessee. The assessee imported already manufactured colour papers, which had been reduced in size according to the needs of the assessee's customers. The original goods as well as the size reduced goods by slitting are all one…

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