TaxTMI 
TaxTMI 
1987 (9) TMI 91
X X X X Extracts X X X X
X X X X Extracts X X X X
....765 by his assessment order dt. 22-12-1984. During the assessment proceedings the assessee claimed investment allowance on the generator newly purchased by it in the relevant accounting year which coasted it a sum of Rs. 38,033. The ITO, however, negatived the claim of the assessee stating that the assessee is only engaged in assembling of radios and transistors for Murphy India Ltd., and the components which go into the making of radios and transistors are supplied by the said company either directly or through their suppliers. The assessee only assembles all the components into radios and transistors, tests them and ensures the quality and dispatches them as per the instructions of Murphy India Ltd. In the work done by the assessee it was paid labour charges at Rs. 6 or Rs. 7 per set. The activity of assembling and testing all these sets is done by the assessee by employing its won labour and also entrusting some of its work to sub-contractors. The assessee itself is a sub-contractor to M/s. Murphy India Ltd. The assessee's activity of assembling and testing of radios and transistors cannot be said to be activity of manufacturing. At best, it can be called as job work. On the abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y as follows : M/s. Murphy India Ltd. supplies loose parts like cabinet, handle, speaker, farrile rod, etc., to the assessee. Whatever parts the assessees are, required to buy are debited to M/s. Murphy India Ltd.'s account and if any excess material is found with the assessees they shall return them to M/s Murphy India Ltd. The assessee employed in the accounting year relevant to the asst. year 1982-83 sixty person for assembling purposes, besides using the following machinery : 1. Drilling machine 2. Transformer 3. Surface grinders 4. Jigs and fixtures. Ultimately is was submitted that the assessee will assemble all the loose parts in the cabinet. The learned counsel for the assessee sought to impress upon us that the loose parts supplied to them would be converted into radios/transistors by use of machinery, assembly lines, labour, power and all other related equipments and service facilities and also the technology available with them. The finished produce is meant to perform the specific function, with the components by themselves could not perform. What is produced by the assessee is thus a new article, different from the various assembling parts and the art....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ling of these loose parts, anywhere, a manufacturing process. The learned counsel for the assessee submitted that originally the word 'manufacture' was not at all defined anywhere in the Income-tax Act. But now by means of Finance Act, 1987 in Explanation (3) of section 10A (7) the word 'manufacture' is defined as follows : "Manufacture includes any (a) process, or (b) assembling, or (c) recording of programmes on any disc tape perforated media or other information storage devices..........." The learned counsel brought to our notice that this definition of the word 'manufacture' was given a retrospective effect from 1-4-1981 and therefore, he argued that the said definition equally applies to the case on hand which relates to asst. year 1982-83. 7. The learned Departmental Representatives strongly opposed the arguments advanced on behalf of the assessee and he has stated that the assessee filed a letter dt. 8-8-1983 when it was specifically called upon to explain the manufacturing activities stated to have been carried on by it. A copy of the said letter is furnished to us. In the said letter the assessee specifically admitted that they were paid only labour char....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or thing : or [iii] In any other industrial undertaking for the purposes of business or construction. Manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule." In the Eleventh Schedule item No. (8) was omitted by Finance Act, 1981 with effect from 1-4-1982. Before this omission it used to be Broadcast television receiver sets, radios (including transistor sets), radiograms and tape recorders (including cassette recorders and tape decks)". Item No. 8 was omitted from the Eleventh Schedule from 1-4-1982. We are now concerned with asst. year 1982-83 for which the law applicable from 1-4-1982 should be applied. Therefore, for our purposes we should take the Eleventh schedule as if it does not consist of item No. 8. Therefore, assemblage of radios and transistor sets is not a prohibited article which would disentitles investment allowance to an industrial under taking. It is significant that clause (3) of section 32A (2) speaks of construction part from manufacture or production. In our under standing construction includes assemblage. Therefore, the assessee who carries on the business of assembling radio sets/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; ------ Total 46,994 ------ The above particulars can be seen from the depreciation chart attached to the asst. order. As the value of the plant and machinery is less than Rs. 2. lakhs there is no difficulty in finding the assessee to be a small scale industrial undertaking. For purposes of grant of investment allowance, industrial undertakings are broadly divided into two categories and the activities which should be carried by these categories are also different. If it is small scale industrial undertaking it is enough if it is engaged in manufacture or production of a nautical or thing despite the fact whether such as article or thing is specified in the list the eleventh Schedule or not. The second category is, all other industrial undertakings which are not small-scale industrial undertakings. Such industrial undertakings are en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is thus manufactured or produced. To take the simplest illustration, it a child takes strips of metal, bolts, nuts, bars, and wheels from out of a meccano set and assembling them together makes a wheel-barrow or a chair, we would say that the child has produced a wheel barrow or a chair if not manufactured it. In the present case, the process is the same but only more sophisticated. The transformation of the components into the finished product is only more marked. Innumerable parts are put together with considerable effort and skill with the aid of specialized tools and machinery run on some form of power; and some this modified to fit each other by mechanical process. The bars which go to make up the chassis on which the foot-boards rest are either welded or riveted together to make chassis. Ultimately, the completed chassis is fitted with an engine and the whole becomes an automobile, while propels itself. The entitle parts or components could not propel itself. The initial parts or components could not propel themselves. Beyond doubt, therefore, it must be held that the assembling of those parts into the finished production of the automobile, amounts to the manufacture or produ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in Idandas's case it is stated as under : "In the instant case, though the patented product from HMM Ltd. was sold internationally, it could not be disputed that it was available only in bottles. Hence, the milk powder in drums was not an article which was commercially available. It was not sold in drums anywhere. In fact, it could not be so sold under the license which HMM Ltd. held. It was sold only in bottles hence when powder in drums was transferred into Horlicks powder in bottles, such the operation involved was only of unpacking of drums and packing the contents in bottles, such operation resulted in production of commercially different article. Packing involved the addition of entire value of bottles, caps, labels, etc. as it was commercially marketable only after all these steps had been completed. Moreover, the assessee was itself the owner of the machinery and engaged labour for such packing. In view of these facts, it could be said that the assessee did manufacture or, at any rate, produce a commercially different article in respect of bottled Horlicks and it was entitled to claim investment allowance." Here also we hold that assuming without admitting the loses ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....clear distinction between the two is implied. Though the expression reserve is not defined since it occurs in taxing statutes applicable to companies only and to no other assessable entities, the expression has to be understood in its popular sense, that is to say, the sense or meaning that is attributed to it by men of business trade and commerce and by person interested in or dealing with companies. Therefore, the meanings attached to the words 'reserves' and 'provisions' in the Companies Act, 1956, dealing with the preparation of the balance sheet and the profit and loss account would govern their constriction for the purposes of the two enactments....." 12. Following the above Supreme Court's decision we have no hesitation to hold after rejecting the learned department representative's argument that the meaning of the word manufacture in section 10A can be used while understanding the ambit of section 32A of the IT act especially when the definition is for the first time given and it was made retrospective and operable from 1-4-1981. We are dealing with the asst. year 1982-83 for which the law applicable from 1-4-1982 onwards is relevant. Therefore, the definition of the wor....