TaxTMI 
TaxTMI 
1992 (3) TMI 112
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.... 80-HH,. 80-I and 80-J of the Act are synonymous with the word 'goods' used in the definition of 'industrial company' in the Finance Act and whether the High Court decision referred to above would equally apply in both the cases." That is how these appeals have come up before this Bench of 5 Members. 2. At the outset, it may be stated that it was agreed between the parties that this Bench has to dispose of these appeals on the basis of the grounds taken up in the memo of appeals and, therefore, the aforesaid question though couched in general terms has to be restricted to the provisions of Section 80-I of the Income-tax Act, 1961 ('the Act'). 3. The common issue raised in these appeals is whether the assessee, engaged in the construction of buildings, would be entitled to deduction contemplated under section 80-I of the Act. 4. The assessment years involved in the case-of M/s R.M. Enterprises are 1983-84 and 1984-85, while in the other cases it is only 1984-85. All the assessees are partnership concerns and are carrying on, inter alia, building construction activity. 5. The Income-tax Officer rejected the claim made under section 80-I of the Act on the ground that th....
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....an 'Industrial Company considered in certain reported decisions while dealing with the rate of tax applicable to such company provided in the annual Finance Act and 'Industrial Undertaking' with which we are concerned in these appeals, that the absence of the word 'construction' in section 80-I of the Act is not fatal so as to deny the assessees the benefit of deduction provided in that section, that the expression 14 article or thing" used in Section 80-I of the Act should not be confined to movable properties only as according to him that expression in its sweep, would include immovable properties also like the one in the present cases, that in the absence of the definition of the words "article" or "thing" provided in the Act, one has to look for dictionary meaning of these words and that when two views are possible on interpretation of the provisions of a Statute, the one in favour of the assessee should be preferred. 9. The learned representative for the Revenue, on the other hand, strongly supported the action of the IT authorities. According to him, the question that has to be decided in these appeals is whether the words "article or thing" are synonymous with the word "g....
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....tion 132 of the Act, he pointed out that the words "article or thing" have been used in conjunction with "any money, bullion, jewellery" which clearly shows that the words "article or thing" have reference to movable properties only. Referring to Sections 80HHC, 80-I(8) and 80J(6B) of the Act, where the use of the word "goods" is to be found, the learned representative for the Revenue strongly argued that all these words namely, article, thing and goods are synonymous and refer to movable properties only. 10. The learned counsel for the assessee, in his reply, submitted that on a proper reading of Section 80-I of the Act, there is no warrant to construe the words "article or thing" to refer to movable properties only. According to him, in the case of N.U.C. (P.) Ltd. and Shah Construction Co. Ltd. , the Hon'ble High Court has given restricted meaning to the definition of 'Industrial Company' contained in the Finance Acts only because the word "construction" is used in connection with ships and not in connection with other construction activities. He also pointed out that the said provision advisedly contains the word "goods" which would refer to movable properties only but, in t....
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....ny Industrial undertaking which fulfils all the following conditions, namely --- (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, and begins to manufacture or produce articles or things at any time within the period of four years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking : Provided further that the condition in clause (iii) shall, in relation to a small scale industrial undertaking, apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. (5) The deduction specified in Sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things (such assessment year being hereinafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. ....
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....ion under section 80-I of the Act, nor specifically debarred from claiming such deduction. 13. The assessees in the present case are engaged in building construction activities of a complex nature employing not only substantial magnitude of man power but also using heavy machineries other than tools and implements generally pressed into service in such activities. The assessees make doors, windows and wooden frames as also manufacture concrete slabs and other allied items which are utilised in building construction though the extent of such manufacture or production was not readily available when called for during the course of hearing. 14. It is in the above background that we have to construe the true meaning of the expressions "Industrial Undertaking" and "manufactures or produces any article or thing" in the context in which they appear in Section 80-I of the Act. The definition of these words are not provided in the section or in the entire Act. Therefore, both the parties referred to other allied sections of the Act, of the Wealth Tax Act, 1957, as well as of the annual Finance Acts, wherein such words appear. They also relied on some decided cases where in the Courts/T....
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....of ships or in the execution of projects or in the manufacture or processing of goods or in mining. Note : - For the purposes of this Explanation :--- (i) a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or carriage, by road or inland waterways, of passengers or goods or in the construction of ships or in the execution of projects or in the manufacture or processing of goods or in mining, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income Tax Act) is not less than fifty-one per cent of such total income; (ii) "projects" means a project for the construction of a building road, dam, bridge or other structure or assembly or installation of any machinery or plant." It would be noticed from the above that building construction activity is outside the purview of an "industrial activity", insofar as industrial company is concerned. If that were not so, then there was no need to use the expression "execution of projects" and the definition of the ex....
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....r aircraft or machinery or plant referred to in sub-section (1) shall be the following namely :--- (a) (b) any new machinery or plant installed after the 31st day of March, 1976,--- (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule." It would be observed that in sub-clause (ii) the word "construction" is not used, while the said word is to be found in sub-clause (iii). Further, a small scale industrial undertaking would be entitled to investment allowance, even in respect of "manufacture" or "production" of any article or thing listed in Eleventh Schedule of the Act. The word "construction" is used in sub-clause (iii) along with the words, "manufacture or production". Therefore, it is possible, to hold that an assessee engaged in building construction activity would....
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....s selected certain industrial undertakings to which both deductions with reference to machinery/plant installed and profits/gains derived from the activities are given, while in the other industrial undertakings only one or the other deduction is granted. Further, in the case of certain "industrial company" a rebate in the rate of tax is also granted in addition to these two deductions. It is no doubt true that the expression "industrial undertaking" has wider connotation than the expression "industrial company". All industrial companies would be industrial undertakings. However, all industrial undertakings need not be industrial companies. The expression "any industrial undertaking" used in various aforesaid sections refers to all types of taxable entities, including a company. Therefore, the decision rendered with reference to an "industrial company", as defined in the annual Finance Acts, may not be applicable to other industrial undertakings. Again, the qualification "mainly engaged" used in the Finance Acts are conspicuous, by its absence in the sections of the Act referred to above. Further, deductions under sections 80HH, 80HHA, 80-I, 80-J are granted with reference to profi....
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....nbsp; [1986] 160 ITR 134 (Delhi) (d) CIT v. Oricon (P.) Ltd. -do- -do- [1989] 176 ITR 407 (Bom.) B. Section 32A (a) CIT v. Bhageeratha Engg. Ltd. [1991] 99 CTR (Ker.) 204 -do- Favour (b) Shankar Construction Co. v. CIT -do- -do- [1991] 189 ITR 463 (Kar.) (c) CIT v. Suresh Malpani & Co. &n....
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....bsp; Against D. Section 80-I (a) Walaiti Ram Gupta & Co. v. ITO [1990] 33 ITD 544 (Delhi) -do- Favour E. Section 80-J (84) (a) CIT v. Cellulose Products of India Chemicals Production or manu- Ltd. [1991] 192 ITR 155 (SC) facture of specific int....
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....se of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent thereof, in computing the total income of the company. (2) This section applies to--- (a) an Indian company ; or (b) any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, but does not apply to any Indian company referred to in clause (a), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in section 108 and its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees." It should be noticed from this section that profits and gains attributable to the bu....
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....1981. Only the activity of manufacture or production of articles or things was retained for the benefit of this deduction. This would suggest that the Legislature did not intend that the construction activity as a priority industry did not need encouragement or needed the legislative support for the grant of deduction. But yet the manufacture or production of any article or thing is retained for the purpose of granting the necessary relief for the promotion of these activities. Thus, while the construction activity such as buildings, dams, roads or other products involving civil and structural works as such is not included, rather eliminated for the grant of this relief yet if any article or thing is required to be manufactured or produced within the meaning of the expression "manufacture or produce" as is now explained by the various High Courts and the Supreme Court and utilised in the construction activity the profits attributable to the manufacture or production of those articles or things will have to be worked out, however, difficult it is and then the deduction provided for in section 80-I has to be granted. This appears to us to be rational interpretation of section 80-I ha....
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....er note that the activity of production or manufacture is held to be conversion of raw materials and inputs into any different items but most of those decisions are under the Excise Laws and they are rendered in the context of movables. At any rate, even if the word "thing" is held for some purposes to include building, the combined expression of "manufacture or production of any article or thing" cannot take into its ambit the activity of construction of buildings for any provision of the Income-tax Act. Therefore, an industrial undertaking simply engaged in the activity of constructing buildings would not be entitled to deduction under section 80-I of the Act. 20. If, however, such undertaking also manufactures or produces articles or things which are used in the building construction activity, it would be entitled to deduction contemplated under that section in respect of profits and gains referable to such activity. The Hon'ble Supreme Court, in the case of Cellulose Products Of India Ltd. , has recently held that in order to qualify for deduction under section 84 (now section 80J) of the Act, it is not necessary that an "industrial undertaking" should start producing the en....