Law:

Section:

Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1983-84 - Whether activity of data processing through use of computers is one which would amount to business of manufacture or production of articles or things and unit which undertakes such computer services for other concerns would be an industrial undertaking and such industrial undertaking is eligible for investment allowance under section 32A on the cost of computers - Held, yes FACTS The assessee-company was engaged in the business of providing computer services to various concerns and received income by way of service charges for such activity. During the year under consideration, the assessee purchased computer and claimed investment allowance on the same under section 32A. The ITO disallowed the claim with a finding that the computer was an office appliance and the assessee could not be said to be engaged in the business of manufacture or production of any article or thing. The findings of the ITO were reversed by the Commissioner (Appeals) who accepted the submission of the assessee that it was engaged in the business of manufacturing and providing 'data system' after using the processing machines and, thus, it was engaged in the business of manufacturing of articles or things. On revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). On reference: HELD Test for determination as to whether machinery/apparatus can be termed as a plant or not would primarily depend upon the function to which the said machinery/apparatus is put, regardless of the location where the machinery/apparatus is situated. This is over and above the test of the end product being an entirely different commercial commodity vis-a-vis the input. Therefore, in the case of computer system or data processing system, the inputs which are fed in are entirely different, in a different form with different indicators. As against that, the end-product, viz., balance-sheets, various accounts, statements analysis, etc., which emerge by way of printouts are distinct and different from the inputs, inasmuch as what comes out is having different connotation and use. Thus, the activity of data…

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