Commissioner of Income Tax vs Jai Prakash Associates

M. Katju, J.

This is a reference application u/s 256(1) of the Income Tax Act in which two following questions have been referred to use for our opinion :

"1.Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that the Commissioner of Income Tax did not lawfully assumed jurisdiction u/s 263(1) of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that the assessee was an industrial udertaking and was, therefore, entitled to investment allowance u/s 32A of the Act ?"

The assessee is a firm engaged in the construction of tunnels, bridges, roads, etc. The relevant assessment years are 1978-79 and 1979-80. The controversy in this case is whether assessee is entitled to the benefit of investment allowance u/s 32A of the Income Tax Act, 1961. The facts of the case as covered by the decision of the Supreme Court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, in which it was held that the construction of a dam does not amount to manufacture or production of an article. Since the assessee is not producing any product, hence in view of the aforesaid decision it is not entitled to the benefit claimed by it.

The question No. 2 for the assessment year 1978-79 and the question referred for assessment year 1979-80 are, therefore, answered in the negative, i.e., against the assessee and in favour of the department.

The question No. 1 is consequential and hence, need not be answered. The reference is disposed of accordingly.