Law:

Section:

Blending various categories of teas and selling them after packaging with new brand name does not amount to manufacturing or production of a new commodity Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1984-85 - Assessee, who was dealing in packaged blended tea under its own brand name, claimed deduction under section 32A in respect of new machinery purchased and put to use during relevant previous year - Whether assessee could be said to be involved in manufacturing or production of a new marketable commodity - Held, no FACTS The assessee dealing, inter alia, in packaged blended tea under its own brand name claimed deduction for investment allowance under section 32A in respect of new machinery purchased and put to use during the relevant previous year contending that it was not merely a blender of tea, but it was producing a new and distinct type of tea having a pre-determined quality in terms of test, liquor, aroma and hygienically packed through mechanical contrivances which it marketed in packet under different brand names and, therefore, it should be considered not only as a blender of tea but also as a manufacturer or a producer of certain types of tea in packed condition. The Assessing Officer rejected the assessee's claim holding that at best the assessee could be considered to be engaged in 'processing' only for which deduction for investment allowance under section 32A would not be available. On appeals, the appellate authorities upheld the impugned order. On appeal to the High Court : HELD The question which was required to be considered in the instant case was whether by blending various categories of teas and selling them after packaging with new brand name, the assessee could be said to be involved in manufacturing or production of a new marketable commodity and, therefore, it was entitled to deduction for investment allowance under section 32A. [Para 11] In view of the decision by the Division Bench of the Calcutta High Court in the case of Appeejay P. Ltd. v. CIT [1994] 206 ITR 367/ 77 Taxman 208, which was binding on the High Court while deciding the present case, the assessee was not entitled to deduction for…

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