1. This is a departmental appeal against the order of the CIT(A) granting investment allowance under Section 32A of the I.T. Act to the assessee. It is contended on behalf of the Department that the findings of the CIT(A) are not correct. It is an admitted fact that the assessee is engaged in construction activity. Inviting our attention to the decision of the Bombay High Court in CIT v. Oricon (P.) Ltd. [1989] 176 ITR 407 in claim of investment allowance upheld in the case of the assessee engaged in construction activity, as the relevant Finance Act referred to manufacture or production of an article or a thing not excepted in the Eleventh Schedule in the assessee's own case where the Court had held that the assessee could not be regarded as an industrial company having regard to the activities carried on by it viz.
construction, the findings of the CIT(A) would appear to be erroneous.
2. The learned counsel for the assessee, on the other hand, relies on the order of the CIT(A).
3. We have heard the parties to the dispute and in our view, the order passed by the CIT(A) has to be upheld. The assessee is engaged in construction activity. As has been held by the Bombay High Court in Oricon (P.) Ltd.'s case (supra), it may not be entitled to concessional rate of tax available to an industrial company, but there is no way to deny the claim of investment allowance. This is because the provisions governing the grant of investment allowance as contained in Section 32A of the I.T. Act cannot be regarded as in pari materia with the definition of industrial company as available in the annual Finance Act. Investment allowance is available to an assessee in regard to the cost of assets used in an industrial undertaking for the purpose of business of construction, manufacture or production of article or thing not being an article or thing specified in the list of the Eleventh Schedule. Industrial company, on the other hand, would mean a company which is mainly engaged in business of generation of electricity or any form of power or in the construction of ship or in the manufacture of processing of goods. In the case of CIT v. N.U.C. (P.) Ltd. [1980] 126 ITR 377/4 Taxman 436 (Bom.), the High Court of Bombay had an occasion to consider the scope and extent of this definition. The assessee in that case was a private limited company, engaged in building construction, erection, planning, execution, repairs etc. of factories.
The claim before the Revenue authorities was that it was an industrial company and therefore was entitled to concessional rate of tax. The Court, "on a perusal of the definition, came to a conclusion that the definition of the industrial company, made a distinction between the activities of construction and of manufacture or processing. Further, the definition covered only a construction company which was engaged in the construction of ships and by necessary implication omits all other construction companies. It was hi that context that the Court held that a construction company simpliciter would not be entitled to be regarded as an industrial company unless the company was engaged in the construction of ships. This decision was followed by the Bombay High Court in the case of CIT v. Shak Construction Co. Ltd. [1983] 142 ITR 696. The decision on which reliance was placed by the learned Departmental Representative was again based on the interpretation of the expression industrial company. In this case, the claim was for investment allowance and as has been observed (supra), such allowance would be admissible even where the industrial undertaking was engaged in construction activity only. The words industrial undertaking have not been defined anywhere in the statute. But as per the accepted meaning given to that expression or as understood in common parlance, it would mean a venture or an enterprise carrying on some activities which had some relation to some industrial activity. In this accepted sense, the assessee was an industrial undertaking and since it was engaged in construction, the same would be entitled to investment allowance. We would like to emphasise that where an assessee carrying on construction activities excluding those of construction of ships would not be treated as industrial company, there would be no legal bar for investment allowance in regard to the cost of the assets installed by a company for carrying on construction activity. In this view of the matter, we are of the view that the CIT( A) was justified in granting the claim of the assessee for investment allowance.