COMMISSIONER OF INCOME TAX Vs. RANGANATHAR AND CO

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this court, under section 256(1) of the Income-tax Act, 1961 :

(2.) THE point for consideration is, whether the assessee, which is engaged in the business of executing civil contract works is entitled to investment allowance under section 32A(2) of the Income-tax Act, 1961, for the assessment year 1978-79. THE Income-tax Officer granted the investment allowance under section 32A(2) but the Commissioner of Income-tax, exercising his jurisdiction under section 263 of the Income-tax Act, 1961, withdrew the investment allowance granted by the Income-tax Officer. THE matter came up by way of second appeal before the Tribunal. THE Tribunal held that inasmuch as the assessee succeeded on the merits in getting the investment allowance under section 32A(2) of the Act, it is not necessary to go into the question of jurisdiction exercised by the Commissioner of Income-tax under section 263 of the Act. Now, learned standing counsel appearing for the Department, brought to our notice a decision of the Supreme Court in CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412, wherein the Supreme Court held that when the assessee engaged in construction work, the assessee is not doing any manufacture or processing, and, therefore, is not entitled to investment allowance under section 32A. THErefore, in view of the said decision of the Supreme Court, we have to hold that the Tribunal was not correct in granting investment allowance under section 32A(2) of the Income-tax Act, 1961, in favour of the assessee in the present case. Accordingly, we answer the question referred to us in the negative and in favour of the Department. No costs. However, now the Tribunal is directed to dispose of the appeal on the question of jurisdiction exercised by the Commissioner of Income-tax under section 263 of the Act, on merits, after giving an opportunity of being heard to the assessee.