TMI Blog2009 (1) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled for allowance of deduction under section 80-IB, i.e., the assessee had to engage 10 or more workers on regular basis at the factory. 3. Further, placed in the above factual and legal scenario, the impugned order of the learned Commissioner of Income-tax (Appeals) is, the appellant prays, patently perverse and contrary to law and consequently merits to be set aside and that of the Assessing Officer be restored." The controversy before us is in respect of the allowability of deduction under section 80-IB of the Act. The briefly stated facts of the case are that, the assessee is a private limited company and engaged in the manufacture of copper wires of varying thickness out of copper rods, as well as trading in ferrous and non-ferrous metals. The assessee claimed the deduction under section 80-IB in respect of the manufacture of non-ferrous metal wires. The Assessing Officer was of the opinion that, the initial raw mate rial/product of the assessee-company is the CC copper wire rod and lower gauge copper wire which is final product, is one and the same. The Assessing Officer was of the further view that all that is done by the assessee is only reducing the gauge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the claim of the assessee. The assessee challenged the action of the Assessing Officer disallowing claim under section 80-IB by way of appeal before the learned Commis sioner of Income-tax (Appeals). It was contended by the assessee that under section 80-IB the words "manufactures or produces" are used and the word "produces" is having the wider connotation than the word "manufacture". The learned Commissioner of Income-tax (Appeals) accepted the contention of the assessee that under section 80-IB word "produces" is also used. Moreover, in respect of the number of employees, a finding was given that the assessee was employing more than ten workers on his rolls in its industrial undertaking. The learned Commissioner of Income-tax (Appeals) therefore, held that all the conditions of section 80-IB of the Act are satisfied by the assessee and hence, the deduction under section 80-IB should be allowed. Now the Revenue is in appeal before us. We have heard the rival submissions of the parties. We have also carefully considered the facts as well as different precedents relied upon by both the parties. The learned Departmental representative supported the order of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely : (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words `not being any article or thing specified in the list in the Eleventh Schedule' had been om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs v. CIT [2001] 251 ITR 806 ; [2001] 168 CTR 489, the Bombay High Court has analysed the entire ship-breaking activity, the articles which emerged from that activity, the various steps which are required to be undertaken for ship-breaking activity and, consequently, after placing reliance on the judgment of this court in N. C. Budharaja and Co.'s case [1993] 204 ITR 412, it has held that the ship-breaking activity resulted in production of articles which emerged when the ship-breaking activity stood undertaken. In our view, the important test which distinguishes the word `production' from `manufacture' is that the word `production' is wider than the word `manufacture' as held in N. C. Budharaja and Co.'s case [1993] 204 ITR 412. Further, it is true that in N. C. Budharaja and Co.'s case [1993] 204 ITR 412, the Division Bench has used the word `new article'. However, what the Division Bench meant was that a distinct article emerges when the process of ship-breaking is undertaken. Further, the Legislature has used the words `manufacture' or `production'. Therefore, the word `production' cannot derive its colour from the word `manufacture'. Further, even according to the dictionary m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are irrelevant." It is pertinent to note here that, in the cases of Vijay Ship Breaking v. CIT [2008] 314 ITR 309 and Sesa Goa Ltd. [2004] 271 ITR 331, the hon'ble Supreme Court applied the interpretation given to the word "production" in the case of N. C. Budhraja and Co. [1993] 204 ITR 412. The hon'ble Supreme Court in clear terms laid down the test which distinguishes the word "production" from "manufacture". In the said decision the hon'ble Supreme Court has considered the word "production" vis-a-vis "manufacture" as used in section 80HH and held that (page 423 of 204 ITR) : "The words `manufacture' and `production' have received extensive judicial attention both under this Act as well as the Central Excise Act and the various sales tax laws. The word `production' has a wider connotation than the word `manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture . . . The word `production' or `produce' when used in juxtaposition with the word `manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate product ..... X X X X Extracts X X X X X X X X Extracts X X X X
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