Law:

Section:

Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment years 1981-82 and 1982-83 - Whether assessee, a small scale industrial unit manufacturing coal briquettes, etc., and engaged in computer business, is entitled to investment allowance on data processing machines - Held, yes FACTS The assessee, a small scale industrial unit, manufactured coal briquettes and lime as well as was engaged in computer business. For the assessment years 1981-82 and 1982-83, the ITO had allowed the investment allowance on data processing machine but the Commissioner, by invoking his power under section 263, held that investment allowance was not admissible on data processing machine as it did not manufacture any article. He, accordingly, set aside the assessment and directed the ITO to make fresh assessments in accordance with law. On appeal, the Tribunal held that investment allowance was allowable on the said machine. On reference : HELD The assessee was a small scale industrial unit. In order to get investment allowance, it had to show that the machinery, i.e., the data processing machines, had been installed for the purpose of business of manufacture or production of any article or thing mentioned in section 32A(2)(b )(ii). It has been held by the Bombay High Court in CIT v. I.B.M. World Trade Corpn. [1981] 130 ITR 739 that data processing machines are not office appliances and as such are eligible for allowance of development rebate under section 33(1). [Para 4A] So far as meaning of the word 'manufacture' appearing in aforesaid provision is concerned, the specific case of the assessee was that it was a small scale industrial unit and on feeding of data into the data processing machines, balance sheets, profit and loss accounts, computations and other statements emerged. In other words, raw data, on being fed into the data processing machines, balance sheets, profit and loss accounts and other statements were manufactured with distinct name, character or use. In view of the decision of the Bombay High Court in CIT v. Shaw Wallace & Co. Ltd. [1993] 201 ITR 17/ 70 Taxman 126 , there cannot be any doubt that raw data cannot be equated with the result…

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