TaxTMI 
TaxTMI 
2006 (1) TMI 68
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial undertaking for the purposes of sections 80HH and 80-I of the Income-tax Act? (2) Whether the Appellate Tribunal is right in law and on facts in confirming the order made by the Commissioner of Income-tax (Appeals) whereby he had held the cars, trucks, dead stock, pumps, etc., are not plant and machinery for the purpose of determining the cost of project for treating the assessee as small scale industrial undertaking?" The assessment years are 1984-85 and 1985-86 with the relevant accounting periods being years ended on July 31, 1983 and July 31, 1984, respectively. The assessee, a private limited company, claimed relief under sections 80HH and 80-I of the Act for both the assessment years. The same was denied by the Assessing Of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivity carried on by the assessee was a manufacturing activity, namely, manufacturing bidies and thus, the assessee was entitled to relief both under sections 80HH and 80-I of the Act. For this purpose, he placed reliance on the Allahabad High Courts decision in the case of CWT v. Mubarakali Khan [1980] 123 ITR 101. In relation to the additional reason given by the Assessing Officer relating to the claim under section 80-1 of the Act, the Commissioner (Appeals) observed that, on the one hand, the Assessing Officer himself had recorded that the assessee did not have any plant and machinery, and on the other hand, for the purposes of determining whether the assessee was a small scale industrial undertaking or not, he took into consideration th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y carried on by the assessee was of such a nature that it could not be termed to be a manufacturing activity. According to him, the assessee did nothing on its own, namely, no activity was carried on by the assessee. All that the assessee did was purchase the raw materials to hand over the same to outside parties, who in fact rolled the bidies. Thereafter, the assessee merely marketed such finished products. For this purpose, he invited attention to a decision of this court in the case of CWT v. Mohinibai Kanaiyalal [1999] 240 ITR 636, to submit that the Allahabad High Court's decision, on which reliance had been placed by the Tribunal, had been considered and explained by this court in the aforesaid decision in the case of CWT v. Mohinibai....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. The article produced must be regarded by the trade as a new and distinct article having an identity of its own, an independent market after the commodity is subjected to the process of manufacture. The nature and extent of the process would vary from case to case, and in a given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, a different kind of proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial things or services geared to celestial bliss, e.g., making on a large scale, prasad or food), prima facie there is an 'industry' in that enterprise. It was further observed that the true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations. Applying the test laid down by the Supreme Court, it must be held that the activity which is carried on by the assessee is an industry and consequently, its undertaking is an industrial undertaking." Whether the assessee carries on the manufacturing activity itself or gets certain processes done from outside, would not make any difference. The said issue is no longer res integra. In the case of CIT v. V. B. Narania and C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has, in the circumstances, committed no error when it came to the conclusion that the Commissioner (Appeals) was justified in treating the activities carried on by the assessee as amounting to manufacture of bidies, entitling the assessee to reliefs under sections 80HH and 80-I of the Act. In relation to the additional reason given by the Assessing Officer for denying relief under section 80-I of the Act, both the Commissioner (Appeals) and the Tribunal have found that, for the purposes of determining whether a unit is a small scale industrial undertaking or not, while ascertaining the monetary limit laid down in the provision, all assets of the business have not to be taken into consideration. This is the correct reading of the provisio....