Construction business not treated as manufacture or processing where ancillary activities were only incidental to the main work.

Questions on whether the assessee was the real owner of a flat and whether income accrued from it were treated as covered by an earlier decision and answered in the assessee's favour. On the rebate issue, the Bombay High Court held that the assessee's dominant business was construction of dams, bridges, buildings and similar works, carried on with machinery, and that any mixing of materials or conversion of boulders into stones was only incidental. The company was therefore not wholly or mainly engaged in the manufacture or processing of goods, and the claim for super-tax rebate failed.

---

---

Issues: Whether the assessee was the real owner of the flat and whether any income accrued from the flat; whether the assessee was wholly or mainly engaged in the manufacture or processing of goods so as to qualify for rebate under the Finance Act, 1964.

Analysis: The questions relating to ownership of the flat and accrual of income were treated as covered by an earlier decision and were answered accordingly in favour of the assessee. On the rebate issue, the Court held that the assessee's principal activity was construction of dams, bridges, buildings and other works, carried on with the aid of machinery. The processing or manufacturing activity, such as mixing materials for concrete and converting boulders into stones, was only incidental or ancillary to the main construction business and did not make the assessee a company wholly or mainly engaged in manufacture or processing of goods.

Conclusion: The flat-related questions were answered in favour of the assessee, but the rebate question was answered against the assessee and in favour of the Revenue.

Final Conclusion: The reference was disposed of with relief to the assessee on the flat issues, but the claim for super-tax rebate failed because construction activity was not held to be the assessee's main manufacturing or processing business.

Ratio Decidendi: For the rebate provision, a company whose dominant activity is construction cannot be treated as wholly or mainly engaged in the manufacture or processing of goods merely because some manufacturing or processing steps are incidental to that construction work.

---