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TMI Blog2010 (9) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... aja and Co. [1993] 204 ITR 412 (SC) and the judgment of the Bombay High Court in Mittal Builders which clearly enunciates the law that material utilised in the construction of dams or buildings would not amount to an article or thing and, therefore, under the facts and circumstances of the present case, would not be entitled to deduction under section 80-IA of the Act ?" 2.The assessee is a limited company carrying on the activity of manufac-turing selling and laying of mosaic tiles and the same was used for flooring for the purpose of construction of buildings. The assessee filed its returns of income for the assessment year 1996-97. 3.The assessee, it appears apart from selling the tiles manufactured, had also entered into contract with its customers for laying the tiles using its own manpower and skills and, thereafter, for even getting it polished. It was charging the customers for the entire contract work inclusive of the value of the tiles, which has been utilised during the execution of the con-tract, etc. 4.The assessee, it appears, had made a distinction of profits earned under the head "Business income", in so far as the activity relating to the manu- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (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, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of ten 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 ; (iv) in a case where the industrial undertaking manufactures or pro-duces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owned or used in Indian territorial waters by a person resident in India ; and (iii) it is brought into use by the Indian company at any time within the period of ten years next following the 1st day of April, 1981. (4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose ; (ii) the business of the hotel is owned and carried on by a com-pany registered in India with a paid-up capital of not less than five hundred thousand rupees ; (iii) the hotel is for the time being approved for the purposes of this sub-section by the Central Government ; (iv) the business of the hotel starts functioning after the 31st day of March, 1981, but before the 1st day of April, 1991. (4A) This section applies to the business of repairs to ocean-going vessels or other powered craft which fulfils all the following condi-tions, namely :- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society, deriving profits and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso shall have effect as if for the words 'nine assessment years', the words 'eleven assessment years' had been substituted. (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the ini-tial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (7) Where the assessee is a person ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale in the open market. (9) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft to which this section applies and any other person, or for any other rea-son, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft, the Assessing Officer shall, in computing the profits and gains of the industrial undertaking or the hotel or the ship or the business of repairs to ocean-going vessels or other powered craft, for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (10) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end product which is commercially known as a different product from the materials out of which it is so produced in keeping with the deci-sion of the Supreme Court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 (SC). 3.2 Vide letter dated January 12, 1998, the assessee asserted that contract receipts are nothing but turnover related to flooring work undertaken where the tiles manufactured by the assessee are used, so that these tiles are either sold directly or used in the flooring work. The assessee further emphasised that when the customer insist upon the assessee to do a turnkey job, execution of the work at site is entrusted incurred for carrying out such works are charged to the customers. The assessee finally stated that it had to undertake turn-key jobs in the interests of sale or products being manufactured by their factory to its viable capacity, however, I tend to disagree with the assessee for the following reasons : 3.3 Irrespective of whether the cost of tiles used which are manu-factured by the assessee forms a larger or lesser component of contract receipts and whether or not the assessee undertakes these turkey jobs for manufacture, laying and po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue-appellants and though the assessee as per the indication in the cause list is represented by a counsel, Sri K. M. Basavaraj, neither his counsel is present before us nor our efforts to secure his pre-sence before the court by directing the registry to ring up to his cell number as provided in the vakalat form, therefore, we proceed to pass judgment only with the assistance of learned senior counsel appearing for the appel-lants. 13.Questions posed as indicated above, the second question automatically answers on the first question being answered. In fact, it may not be very necessary to answer the second question elaborately. 14. The provision occurring in Chapter VI-A of the Act is a provision for extending certain issues or benefits though called by different names such as deduction, relief or rebate, etc. Ultimately, such provisions attract the assessee because it reduces the tax liability, which would welcome the assessee. In all, section 80-I of the Act, very clearly indicates the benefits that will be available when there is an industrial undertaking in existence and such an industrial undertaking should embark upon an activity of pro-ducing or manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words "article" or "thing" as spelt out by the Supreme Court in Budharaja's case, in our view, is a relevant aspect which can be definitely called in aid without per se interpretation placed on different section cannot be imported to interpret another section and in this case, interpretation under section 80HH per se cannot be transplanted to section 80-I of the Act. If we go by that version, then, we find that the Division Bench decision of the Madhya Pradesh High Court reported in CIT v. Agrawal Brothers [1997] 228 ITR 144 (MP), wherein the Bench has opined that section 80-I of the Act interpret the provision in favour of the Revenue to hold that an activity under the nature of contract of overhead water tanks is not an activity of manufacturing or even the activity under-taken by the assessee is an industrial undertaking. Therefore, we do not find that section 80-I of the Act having directly come for interpretation either by other High Courts or by the Supreme Court. Of course,in the present situation, the question before us is exactly which was considered by the Madhya Pradesh High Court as the assessee per se is a manufacturer of tiles, which is a thing or article, embarked up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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