COMMISSIONER OF INCOME TAX Vs. KRISHNA MOHAN CONSTRUCTIONS

JUDGEMENT

(1.) TWO questions have been referred at the instance of revenue for our opinion under S. 256(1) of the IT Act, 1961 ('the Act'). They are as under: Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the contract work undertaken by the assessee, mainly of widening the existing roads and providing flexible overlays, is an 'industrial undertaking' which is eligible for investment allowance under S. 32A?

(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal is justified in remitting back the issue to the ITO directing him to examine the issue of investment allowance after verifying the facts whether the assessee has satisfied the conditions required under S. 34A(4) of the Income -tax Act, 1961?" 2 In order to appreciate the nature of the controversy underlying these questions, it is necessary to note a few introductory facts. The respondent-assessee is a firm of contractors. For the asst. yr. 1980-81, it had taken up contract work mainly of widening the existing roads and providing flexible overlays. During the year, the assessee has claimed investment allowance under S. 32A of the Act amounting to Rs.1,88,324, being one-fourth of the total cost of machinery of Rs.7,53,299. The assessee stated to have purchased and having installed the new machinery after 31st March, 1976 claimed this allowance in the accounting year relevant to the asst. yr. 1980-81. That was claimed under S. 32A(2) (b) on the basis that it was an industrial undertaking and was engaged in construction of roads. The ITO held that the nature of the work undertaken by the firm was widening of the roads and as such it could by no means make it an industrial undertaking, and further held that the assessee must be able to show that it was an industrial undertaking, being engaged in activities as specified in cls. (b) (ii) and (b) (iii) of sub-s. (2) of S. 32A and the assessee having not satisfied these conditions was not entitled to claim the investment allowance.

(3.) IN order to appreciate the grounds raised on behalf of the Department before us, it is necessary to look at relevant statutory provision holding the field at the relevant time. Sec. 32A(1) and 32A (2)(a) and (b) deal with investment allowance and read as under: