1986-VIL-82-ITAT-JAI
Equivalent Citation: ITD 021, 622, TTJ 029, 028,
Income Tax Appellate Tribunal JAIPUR
Date: 29.08.1986
INCOME-TAX OFFICER.
Vs
AGARWAL STONE INDUSTRIES.
BENCH
Member(s) : H. S. AHLUWALIA., A. KALYANASUNDHARAM.
JUDGMENT
Per Shri A. Kalyanasundharam, Accountant Member--This is an appeal by the revenue and the grievance of the department is two-fold, i.e., holding of the assessee-firm as an industrial undertaking and also allowing investment allowance on the dumpers.
2. The assessee-firm carried on the activity of mining of stones from stone quarries and selling them. The assessee had claimed investment allowance on the use of dumpers as the same were used in the mining activity and also on the ground that it is a plant and that the mining activity is one of industrial activity. The ITO referred to section 32A and observed that the assessee though may be an industry as recognised by small-scale undertaking cannot be said to be manufacturing or producing any article or thing and, therefore, is not an industrial undertaking so as to be eligible for claim of investment allowance.
3. Aggrieved, the assessee preferred appeals to the AAC, who relied on the orders of this Tribunal in the case of Associated Stone Industries, Kota Ltd. and came to the conclusion that the dumpers are plant and on the basis of the fact that the assessee is registered with the District Industries as industry, he came to the conclusion that it was an industrial undertaking and, therefore, entitled to investment allowance.
4. The grievance of the department before us was that mining has not been specified to be an activity eligible for investment allowance specifically. It was also submitted that merely because an assessee is a small-scale industry undertaking is not sufficient to allow the claim of investment allowance as it has one other condition to be satisfied which is that it manufactures or produces any article or thing, the extraction of the stones from the earth does not result in manufacturing activity and, therefore, to come to the conclusion that it is an industrial undertaking is improper.
5. For the assessee, the contention was that the assessee's case is squarely covered by the Associated Stone's case of this Tribunal. It was further argued that initially the case was heard by the AAC, who remanded it back to the ITO with a direction to ascertain the fact as to whether the dumpers was used as a road transport vehicle or was used in the mining activity. This direction was given by the AAC as the assessee had claimed the investment allowance, which was earlier rejected by the ITO treating the dumper as road transport vehicle. It is in the present order, the ITO has observed that the dumpers are used by the assessee wholly for the purposes of removing the over burden from the stone deposit and is not used as a transport vehicle. Under these circumstances, the submission of the counsel was since against the original order of the AAC by which the matter was remanded back the department having not come up in appeal at present they are debarred from raising the issuing in appeal. He also relied on the order of the Tribunal in Hukam Singh Inder Mohan Singh v. ITO [1986] 18 ITD 1 (Delhi) (TM).
6. We have given a very careful consideration to the argument of the parties. At the out-set to the objection raised by the assessee's counsel of maintainability of the appeal of the department, we have only to observe that the AAC's observation in his order remanding back the matter was with a view to ascertain the facts and to decide the matter afresh. He has neither indicated as to what is the possible conclusion nor what should be the conclusion arrived at by the ITO. Rather he has left the entire field open to the ITO and the ITO has rightly used this particular direction and examined the issue afresh and came to the conclusion that the dumpers are, in fact, used in the mining activity. Therefore, this objection of the assessee regarding the maintainability of the appeal fails and is of no consequence. The other contention of the assessee was that since a person is recognised to be a small-scale industrial undertaking, it automatically becomes entitled to investment allowance and there is absolutely no necessity of carrying out any further examination as regards the contention that it must be carrying on the activity of manufacture or production of an article or thing. This contention of the assessee is no doubt quite plausible, however, we have to necessarily examine as to whether this can be made a proposition of law or not.
7. The activity of the assessee is basically to extract stones from the earth by the process of digging. After the stones are taken out the stones are broken and then the broken stones are sold.
8. In the case of Associated Stone Industries [IT Appeal No. 1050 (Ahd.) of 1977-78] for assessment year 1977-78 reported in 1983 Tax World Vol. VI Section IV page 220. In that case the conclusion of the Members was that in case the dumpers are used for removal of the over burden from one point to another, then in view of the opinion of the Law Ministry, which opinion was circulated by the CBDT vide their circular dated 24-2-1975 then in that case the real character of the dumpers would be in the nature of plant.
9. In that case the case decided by the Ahmedabad Bench in Shiv Construction Co. [IT Appeal No. 1126 (Jp.) of 1981] for assessment year 1974-75 was also considered and relied upon. The reference was made to section 32A especially for consideration of the road transport vehicle. The observation of the ITO in that case was "what may be transport vehicles in the hand of one person, could be a tool of business in the hands of the other". The reference to the letter from the Board dated 24-2-75 along with which the Law Ministry's opinion dated 15-2-75 was also considered which was on the subject of allowing of development rebate on dumpers and tippers. The Law Ministry was of the view that the dumpers would be a transport vehicle if it used as such but if they are used in the industrial or mining areas to remove the over burden from one point to another then they would not constitute road transport vehicle but plant. They, therefore, came to the conclusion that the usage of a particular item would determine the real character of that item.
10. On this basis, this Tribunal in that case to the conclusion that the dumpers are plants. In that case also they were considering the claim of investment allowance on the dumpers and came to the conclusion that since it is a plant it is entitled to investment allowance and for coming to this view that it relied on the Ahmedabad Bench judgment as well as the Law Ministry's opinion which was in regard to the claim of development rebate on dumpers and tippers.
11. In the above rulings, the Members did not have the occasion to consider the issue of the claim of the investment allowance from the point of view of mining being termed as manufacturing or producing activity.
11.1 In the afore mentioned rulings, the Members did not examine as to whether the provisions of development rebate and investment allowance are identical in nature or not. The development rebate was allowable on any machinery used in the business of an assessee but for claim of investment allowance, certain clear cut provisions have been introduced. For being eligible to the claim of investment allowance one of the requirements that needs to be satisfied that the business carried on must be one of manufacture of production of any article or thing. The opinion of the Law Ministry by means of which dumpers are allowed development rebate was only to the extent that since dumpers were used in the business of mining for removal of over burden they were held to be plant. We have no disagreement with the opinion of the Law Ministry to the extent that it is a plant that dumper is a plant as far as the assessee is concerned but whether since they were allowed development rebate they could also be entitled to investment allowance on the same theory, to our mind, would not be wholly justified unless it can be held that mining is an activity whereby some article or thing is manufactured or produced. Since mining is not specifically defined as manufacture or production, we have no other option but to fall back on the general usage and acceptance by the industries as such.
12. Section 33(1)(b)(B)(i) refers to 5th Schedule which specified article or things which are considered as manufacture or production for allowing of the development rebate. Section 32A makes a mention of production or manufacture of an article or thing, no scheduled had been referred to, especially when it takes of about the small-scale industrial undertaking. Schedule 11 has been referred to only in cases of other than the small scale industrial undertaking.
13. The word 'mine' is defined as a place from which minerals are dug. The word 'mineral' has been defined as a substance produced by process of inorganic nature Chamber's 20th Century Dictionary.
14. The word produce has been defined to bring forward or out, to bring into being, to bring forth, to yield, to create value. Production has been defined as act of producing a product, creation of values. The word 'manufacture' has been defined to make to fabricate Chamber's (20th Century Dictionary).
15. From the general meaning, it appears that the mining activity results in a manufacture or a producing activity. This appears to be so, as the stones which are buried in the earth have to be dug out from the earth and by use of various explosives or by other means the stones are excavated or quarried from the earth. Thus, the stones which are brought out of the earth in a way can be said to be manufactured or produced. From this point of view it could possibly be concluded that mining is an industrial activity which involves manufacture or production of an article or thing. Perhaps, considering from this perspective, the small-scale industries department had treated the assessee as a small-scale industry. We, accordingly, have come to the conclusion that assessee is carrying on the manufacture of stones, and the dumpers being used in the mining of stones being a plant, is eligible for investment allowance under section 32A and we direct the ITO to claim to the assessee.
16. The appeal by the department fails.
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