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TMI Blog1992 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the firm being engaged in the construction of multi-storeyed buildings is an industrial undertaking within the meaning of the said provision. The firm set up a similar claim under section 80J of the Income-tax Act but the Income-tax Officer did not accept the firm as an industrial undertaking. Consequently, the claim of exemption under section 5(1)(xxxii) of the Wealth-tax Act was also denied to the assessee. Being aggrieved, the assessee challenged the above order in appeal before the Deputy Commissioner of Income-tax (Appeals), and contended that the Tribunal, in the case of the firm, held the firm to be an industrial undertaking for the purpose of section 80J of the Income-tax Act, vide its order dated September 4, 1986, in Income-tax Appeals Nos. 720 to 722 and 2037/(Cal) of 1985. The Deputy Commissioner of Income-tax (Appeals), following the said order of the Tribunal, directed that exemption under section 5(1)(xxxii) of the Wealth-tax Act be allowed to the assessee. In its appeal before the Tribunal, the Revenue contested the finding of the Deputy Commissioner of Income-tax (Appeals). The Tribunal, however, found that, in view of its finding in the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought within the import of the expression "the manufacture or processing of goods". The Tribunal has sought to find this activity a place in the last category of industrial undertaking, viz., an undertaking engaged in "manufacture or processing of goods" obviously because the description of other industrial activities do not admit of inclusion of such activity. Any activity to come within the scope of this definition must fall under any of the classes. One thing is quite clear that the manufacture or processing of goods cannot include construction of multi-storeyed buildings. The Explanation, no doubt, covers a construction company, but such coverage is only for construction undertakings engaged in construction of ships. No other type of construction has place in it. By necessary implication, all constructions as well as repair of buildings is not comprehended by the expression construction of ships. Our attention has been drawn to a decision of the Bombay High Court in CIT v. N. U. C. Pvt. Ltd. [1980] 126 ITR 377 and to a decision of the Delhi High Court in CIT v. Minocha Bros. P. Ltd. [1986] 160 ITR 134. In these cases, the implication of the definition of "industrial undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking as an undertaking "engaged in the manufacture, production or processing of goods or articles". The Delhi High Court, however, reversed the Tribunal's final conclusion holding that so far as the incidental product or the feeding product could have a market, it is to be said that the undertaking was engaged in the manufacture or production or processing of goods or articles, no matter that, in the assessee's case, the said product was not intended for the market but for exclusive use of the assessee's ultimate product, i,e., dams and barrages. The Delhi High Court, relying on the facts furnishing the requirement of continuity of action in manufacturing or processing of such feeding materials, ultimately held that the manufacture or production of the feeding material should entitle the assessee to the exemption. The words "engaged in the manufacture, production" should normally mean a continuity of occupation in the manufacture as distinguished from an occasional participation or single act or casual employment or a mere supervision without physical participation. In that connection, the Delhi High Court relied upon a decision of the Supreme Court interpreting section 1(3)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction of a clause which is capable of two reasonably possible constructions, it is not easy to make a choice, particularly when both constructions seem to lead to some anomalies. On the whole, however, we are inclined to take the view that the clause " engaged in any industry specified in Schedule I" should be interpreted to mean "mainly engaged in any industry specified in Schedule I". If a factory is engaged in two industrial activities one of which is its primary, principal or dominant activity and the other is a purely subsidiary, incidental, minor or feeding activity, then it is the primary or the dominant activity which should determine the character of the factory under section 1(3)(a). This view does not purport to add any word to the section ; it merely interprets the relevant expression "engaged in any industry specified in Schedule I". When it is said that a person is engaged in any business, it usually means he is engaged mainly or principally in that business ; and the same would be the position when the relevant clause refers to an establishment engaged in the specified industry. That is the commonsense view which is consistent with the current and accepted denot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end-result is not manufacture of goods or articles but manufacture of an immovable thing like a dam or a barrage. The Supreme Court's decision relied on by the Delhi High Court, far from lending support to the assessee's case, strengthens the Revenue's contention that any manufacturing or processing incidental to the fundamental object of construction of civil structure could not be a material consideration. The ultimate fact that the result of the activity is the construction of a dam or barrage shall override the consideration of manufacturing activity arising incidentally or obliquely. The Supreme Court in that case said that, if the dominant object is non-manufacturing or non-processing, then the manufacture of input materials of such end-product would also take its colour from the end-product. Thus, in our view, the decision in National Projects Construction Corpn. Ltd. [1969] 74 ITR 465 (Delhi) has inversed the underlying proposition of the said decision of the Supreme Court. The decision of the Delhi High Court amounts to saying that the end-result, i.e., construction of dams or barrages, does not stand in the way of treating the assessee as one engaged in manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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