Industrial undertaking test under section 35D denied for road and railway construction activity without manufacturing or production

Deduction under section 35D was confined to expenditure for extension of, or setting up, an industrial undertaking. An assessee engaged in construction of roads, bridges and railway track was not shown to be carrying on manufacturing or production of an article or thing, and such construction activity did not amount to manufacture or production. On that basis, the assessee did not qualify as an industrial undertaking for section 35D purposes, and the disallowance of the deduction was sustained.

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Issues: Whether the assessee, engaged in construction of roads, bridges and railway track, qualified as an industrial undertaking for the purpose of deduction under section 35D of the Income-tax Act, 1961.

Analysis: Deduction under section 35D is available only where the expenditure is incurred in connection with the extension of an industrial undertaking or setting up of a new industrial unit. The assessee was not shown to be engaged in manufacturing or production of an article or thing. Construction activity, including laying of railway track, was held not to amount to manufacture or production, and therefore did not bring the assessee within the meaning of industrial undertaking for the purpose of the section.

Conclusion: The assessee was not entitled to deduction under section 35D; the disallowance was sustained and the issue was decided against the assessee.

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