TMI Blog1982 (9) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal the Commissioner (Appeals), following the decisions of the Bombay Tribunal Benches in some other cases held that the assessee was entitled to this deduction. However, he gave a finding that the industrial undertaking had started functioning in the accounting year relating to the assessment year 1975-76 and would be entitled to the deduction only up to 1979-80. While the department is aggrieved against the finding that the assessee is entitled to the deduction, the assessee is aggrieved against the finding of the Commissioner (Appeals) that the first year of such eligibility is the assessment year 1975-76. 4. We will first of all address ourselves to the question whether the assessee is entitled to the deduction. Shri Ramani, learned counsel for the assessee, had placed reliance on the decision of the Bombay High Court in the case of CIT v. Pressure Piling Co. (India) (P.) Ltd. [1980] 126 ITR 333 (Bom.) and the case of CIT v. N.C. Budharaja Co. [1980] 121 ITR 212 (Ori.). According to him, the Bombay High Court decision in the case of Pressure Piling is directly applicable on the point at issue since that was also a case of a construction company and the claim was regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court case, he submitted that certain construction activities were involved like breaking up of boulders. On the other hand, he submitted that the department's case is squarely covered by another Bombay High Court decision reported in the case of CIT v. N.U.C. (P.) Ltd. [1980] 126 ITR 377 (Bom). 7. After giving anxious consideration to the question we have come to the finding that the assessee is not entitled to the deduction. He will first cut out the requirements to be satisfied before an assessee could claim the deduction. The requirements are given in section 80J(4), which is reproduced below:-- "(4) This section applies to any industrial undertaking which fulfills 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 articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture'. But, this is along with certain other expressions as, for example, in clause (a) 'for the purposes of business of construction, manufacture or production'. A similar expression is also found in connection with the investment allowance under section 32A of the Act. Sub-section (2), clause (b), sub-clause (iii) uses identical expressions. The words 'construction' and 'manufacture' find a place there. In the definition of 'industrial company' in the Finance Act, the expression 'construction' is used in contradistinction to 'manufacture'. We will, for illustration, give the definition as found in the Finance Act, 1974, in section 2(8)(c) : "(c) '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 manufacture or processing of goods or in mining ;" 10. The above sections have been noticed only for the purpose of establishing that wherever the statute had intended that certain construction activities should also be included, that was separately mentioned. The Legislature has not rest content with the use of the expression 'manufacture' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they had taken pains to explain that the fact that the piles were later used in construction of a building did not detract the assessee's claim. We, on the other hand, are considering the case of a construction company. This decision, therefore, is not going to help in deciding this issue. We can make it further clear by citing passages from the decision. It is observed : " . . .The crucial question which is to be decided in this case is whether the file which is prepared at the construction site by the special process of pressure piling can be said to be an article. Mr. Joshi supported the view taken by the Judicial Member of the Tribunal and, according to Mr. Joshi, unless a thing can be sold or supplied, it cannot be classified as an article and, in the instant case, the process of piling is in essence a part of the building activity. According to him, it is a part and parcel of the activity of construction or raising a building because the work of piling is done at the site itself." So, before the High Court, the case made out is that construction activities are not entitled to the deduction. This submission is met by the High Court by pointing out that what the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sarily be confined to manufacture and production of articles. Even in the absence of either of them, in the strict sense there could be an industrial undertaking. The Tribunal in the instant case has clearly recorded a finding of fact that the assessee had undertaken manufacture of certain materials which it ultimately utilised in the construction of the dam and it worked for the ultimate production of a dam. Assessee's counsel has canvassed that there is no warrant for the submission of learned standing counsel that a dam would not be an article. 'Article', according to the Shorter Oxford English Dictionary, means 'a commodity, a piece of goods or property'. It need not be confined to movable property. There would be no justification to hold that a dam is not an article in that sense of the term. We would reiterate here that there is considerable force in Mr. Rath's argument that it was not the intention of Parliament in sub-section (2)(i) to exclude industrial undertakings which did not manufacture or produce articles, from the benefit even if one was an industrial undertaking not engaging itself in manufacture or production of articles, it could as well have the benefit if the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction of anything other than ships Prima facie, therefore, a company such as the assessee, whose business is to construct and/or repair buildings and factories will not be covered by the said definition. We should have, therefore, thought that the said definition being clear and unambiguous, there was no difficulty in holding that the assessee-company did not fall within the said definition. However, as has been pointed out earlier, the Tribunal has ignored the manifest implications of the said definition and by relying on the expression 'in the manufacture or processing of goods' contained in the said definition, has tried to fit the assessee-company in the said definition. For doing this, further, it has artificially divided the business of the assessee into two parts, viz., the manufacture of door and window frames and concrete slabs, and the construction and repair of the buildings for which the said manufacture is done. As stated earlier, the making of door and window frames and of the concrete beams and slabs is admittedly in the process of the construction and repair of the buildings themselves. There is, therefore, no scope for dividing the business of the company into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressions have to be subjected to limitations and qualifications and that such limitations and qualifications are of the same nature, that circumstance forms a strong argument for subjecting the expression in dispute to a like limitation and qualification." 18. In applying this test, we must ask ourselves what is the limitation that is imposed on the word 'manufacture' in this Act ? The limitation is apparent when we see other sections which have used the word 'construction'. Therefore, reading the Act as a whole, whenever we interpret the word 'manufacture' we must exclude therefrom construction. Otherwise those sections which use the word 'construction' must be held to construe redundant words. We cannot say they are 'surplusage' if we exclude construction from manufacture. 19. So far we have been dealing with the expression 'manufacture'. We will now turn to the expression 'article', and consider whether a building is an article. We have seen that the Orissa High Court has held that a dam is an article. It supports the assessee's case. But this alone is not going to help in deciding the issue. The assessee must also be a manufacturer. 20. With regard to the Tribunal deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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