Law:

Section:

Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1988-89 - Assessee-company which was running a bakery claimed investment allowance in respect of plant and machinery installed and put to use for manufacture of various products like bread, biscuits and cakes - Assessing Officer disallowed said claim on ground that running a bakery and preparation of food articles did not constitute manufacture or production - Whether since raw materials, viz., flour, ghee, sugar, etc. which were used by assessee to prepare bread, biscuits, cakes did not retain their original identity after undergoing processing and resulted into production of new and distinct articles, i.e., bread, biscuits, cakes, etc. it could be said that assessee was carrying on business of manufacturing of various products like bread, biscuits, cakes, etc., and it would be entitled to claim investment allowance - Held, yes FACTS The assessee-company which was running a bakery, claimed investment allowance in respect of plant and machinery, installed and put to use in the relevant assessment year for the manufacture of various products like bread, biscuits and cakes. The Assessing Officer disallowed said claim on the ground that running a bakery and preparation of food articles did not constitute manufacture or production. On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer. On further appeal, the Tribunal allowed the claim of the assessee. On reference: HELD The assessee used flour, ghee, sugar, etc., to prepare/produce bread, biscuits and cakes, etc. The end-product which was obtained after the raw materials were processed/consumed was an article which was regarded in the trade, by those who deal in it, as being distinct in identity from the commodity involved in its manufacture. In other words, the produced goods were never known or sold to the customer/consumer as flour, ghee or sugar. The nature and extent of the processing was of such magnitude that the change which occurred resulted in different commodity commercially and was recognised as a new and distinct article. The inputs could no longer be identified as such and the produced article…

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