1. These are appeals against the orders of the Commissioner made under Section 263 of the Income-tax Act, 1961 ('the Act') for the assessment years 1979-80 and 1980-81. The assessee claimed investment allowance under Section 32A of the Act which was allowed by the I TO in the assessments made for the assessment years 1979-80 and 1980-81. The Commissioner was of the view that the assessment orders are erroneous and prejudicial to the interests of the revenue and, accordingly, he revised those orders under Section 263. He held that the assessee is engaged in running an automobile workshop. When an engine or an automobile is entrusted with the assessee, it is in disrepair and when it is given back it is fully repaired. Even in the commercial sense no new product comes out of the alleged manufacturing process. Since no manufacture or production is carried on by the assessee, the mere obtaining of a licence on the basis that the assessee is running an industrial undertaking will not be sufficient. No new commercial product comes out of the repairing process. Thus, the assessee is not entitled to investment allowance. Thus, he directed the ITO to withdraw the investment allowance granted for the assessment years 1979-80 and 1980-81. Against the same, the assessee has preferred these appeals.
2. The learned counsel for the assessee submitted that the assessee produces a new article or thing in its workshop by reboring the engine and carrying out various other operations. This amounts to production of an article or thing. Thus, the assessee is entitled to investment allowance. He placed reliance on the decisions in CIT v. Perfect Liners [1983] 142 ITR 654 (Mad.) and Singh Engg. Works (P.) Ltd. v. CIT [1979] 119 ITR 891 (All.). The learned departmental representative strongly urged that no new article or thing is either manufactured or produced by the assessee. Hence, no investment allowance could be allowed. It only carries out repair work. He placed reliance on the decision in CIT v. N.U.C. (P.) Ltd. [1980] 126 ITR 377 (Bom.).
3. We have considered the rival submissions. The assessee is engaged in running an automobile workshop. The assessee does not manufacture or produce any article or thing. The engine which had become unusable is rendered usable by subjecting the same to certain processing but by that the assessee does not manufacture or produce any new article or thing. Thus, in our view the assessee is not entitled to investment allowance.
4. In CITv. Hindusthan Metal Refining Works (P.) Ltd. [1981] 128 ITR 472, the Calcutta High Court held that production or manufacture of goods involves bringing into existence new goods or articles known as such goods or articles in the market. In that case it was held that the process of galvanising does not bring into existence a different article or an article commonly known to the people differently who deal with it before it was galvanised. In Mrs. Daisy Paul v. WTO [1985] 14 ITD 290 (Coch.), the assessee was a partner in Popular Garage, the assessee now under appeal. There it was contended before the Tribunal that the work of reboring carried in the Popular Garage will amount to manufacture or producing an article or thing. This contention was not accepted by this Bench of the Tribunal. It was held that the assessee carried on 'only processing of engine block which had become useless and giving the same a new life and such an activity does not amount to manufacturing or producing any article or thing. But the activity of Popular Garage clearly amounts to the processing of the engine as a result of which an engine which had become unusable becomes useful and gets a new lease of life. The above orders squarely apply. Thus, in our view, the assessee carried only processing activity and is not entitled to investment allowance. The J decisions relied on by the assessee's counsel are distinguishable. The decision of the Madras High Court in Perfect Liners' case (supra) is a case where the assessee was engaged in business of purchasing rough castings and supplying the same to the manufacturers of pumpsets, tractors, etc., after machining and polishing them in its factory. In the instant case there is neither any purchase nor sale of any item which is manufactured or produced. Hence, the above case has no application. Ths decision of Singh Engg. Works (P.) Ltd.'s case (supra) has also no application as that is a case of manufacture of iron bars and rods out of ingots manufactured from scrap. Thus, we uphold the orders of the Commissioner made under Section 263.