TMI Blog2004 (10) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... and gives the same to the weavers to weave cloth as per his design. The cloth is then dyed and calendered. The applicant gets this work done on job basis from others. He does not have any factory or machinery of his own. During the assessment years 1982-83 and 1983-84, he claimed deduction under section 80-I of the Act. The claim was rejected by the Assessing Officer, which has been upheld by the Appellate Assistant Commissioner as also by the Tribunal. The Tribunal has held that admittedly the applicant has no manufacturing activity wherein he might be carrying on any manufacturing process with the aid of power and wherein he might be engaging 10 or more workers. It was of the view that a small scale industrial undertaking to be taken under section 80-I of the Act, a person has to own plant and machinery or has to hire plant and machinery, the value of which should be Rs. 20 lakhs or less. The manufacturing process should be undertaken in the premises of the assessee's industrial undertaking and 10 or more persons should be employed. We have heard Sri Vikram Gulati, learned counsel for the applicant, and Sri Shambhoo Chopra, learned standing counsel for the Revenue. Learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip or the business of a hotel, or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel, as if for the words 'twenty per cent.', the words 'twenty-five per cent.' had being substituted. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely: ... (iv) in a case where the industrial undertaking manufactures or produces 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 ... Explanation 3.- For the purposes of this subjection, 'small scale industrial undertaking' shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the assessee should own plant and machinery as also employ in the manufacturing process 10 or more persons as the case may be. In the case of Orient Longman Ltd. [1981] 130 ITR 477 the Delhi High Court was considering the question as to whether the company which carries on business of publication, purchase and sale of books was an industrial company within the meaning of section 2(6)(c) of the Finance Act, 1970, which defines the industrial company as follows: "The industrial company means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacturing or processing of goods or in mining." The Delhi High Court has held that books in the manufactured state which are sold to customers are goods and their manufacture or processing is, as in the case of other goods, the conversion of paper and the manuscript written by an author into a book. This certainly involves either manufacture or processing, and, there is no doubt that the assessee was engaged in the business of manufacturing or processing books and, therefore the assessee was an industrial company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the assessee amounted to manufacture or production of articles and it was entitled to the benefit of the provisions of section 80-I and section 80J. In the case of Penwalt India Ltd. [1992] 196 ITR 813 the Bombay High Court has held that an assessee would be said to be engaged in manufacturing activity if he is doing a part of the manufacturing activity by himself and, for the rest of it, engages the services of somebody else on a contract other than a contract of purchase. In the case of Sri Meenakshi Asphalts [2004] 266 ITR 626 the Madras High Court has held that no new product emerged from the process employed where the assessee which was a small scale industrial undertaking made blown bitumen. What was bitumen continued to be bitumen, but with lesser quantity of oil and moisture. The purposes for which it could be used were only the purposes for which the use of bitumen was appropriate. Heating of the scrap bitumen in order to obtain solid bitumen, by causing the moisture and oil in the scrap bitumen to evaporate or separate, could not be compared to curing of coffee and the conversion of raw berry into coffee beans and the assessee was not entitled to special d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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