TMI Blog1989 (6) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as activity of manufacturing and selling those photo copies or zerox copies of documents to it,, clients and that the activity did not involve any industrial activity. The Bench of the Tribunal before whom the present, appeals for assessment years 1982-83 and 1983-84 initially came up for hearing found that a contrary view had been taken on this point by another Bench in the case of B. V. Date v. ITO [IT Appeal No. 3603 (Bom.) of 1983, dated 24-3-1984] and that it was necessary to resolve the conflict as the point was of repetitive nature. Consequently, the said Bench requested the President to constitute a larger Bench of three members so that the said conflict could be resolved. Accordingly the present Bench has been constituted by the President. 2. The learned departmental representative by way of a preliminary objection submitted that since the point in controversy, after elaborate discussion, had been decided against the assessee by the Tribunal in the appeals for earlier years and the matter was pending before the High Court in Reference u/s 256(1) of the Act, the same view should be adopted for the assessment years with which we are concerned and that no departure fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been registered as a small scale industrial unit by the Directorate of Industries, Government of Maharashtra. The activity mentioned in the certificate of Registration as a small scale industrial unit is "ZEROX printing and rotary copying". It is further mentioned in the said certificate that the aforementioned activity had been defined as "Service Industry" under Rule 27. 6. In the accounting year relevant to assessment years 1982-83 and 1983-84 the assessee installed certain machinery in respect of the business carried on by the assessee and claimed investment allowance on the cost thereof. The following are the details: Assessment year : 1982-83 Sr. Machines cost @ Investment No. allowance claimed Rs. Rs. 1. Transfer printing 93,140 25% 23,285 machine 2. IBM Typewriter 34,500 25 % 8,625 ---------------- -------------- 1,27,640 31,910 ---------------- -------------- Assessment year : 1983-84 Cannon N.P. 210 94,815 25% 23,704 Plain paper copier machine. 7. The said claim was rejected by the ITO on the ground that identical claim had been rejected by him in the assessment orders of earlier years. In the appeals filed by the assessee against said reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l refer in due course in this order. He filed before us brochures in which the working of the machines in question has been explained. 9. Shri B.G. Aggarwal, the learned departmental representative relied on the reasons given in the order of the Tribunal in the assessee's case for earlier years and submitted that we should not depart from the view taken therein. He submitted that the assessee could not be regarded as an industrial undertaking and the activity of the assessee could not be regarded as that of production of an article or thing. According to him, an article or thing would connote article of merchandise which could be sold in the market and that copies produced by the assessee were not saleable in the market. He submitted that machines in question were office appliances and as such investment allowance was not allowable. He relied on certain decisions to which we shall discuss in the course of this order. 10. We have considered the rival submissions and facts brought on record. The brochures explaining the working of the machines in question indicate the machines in question were high-tech copiers. One of the machines, functions as enlargement/reduction copier. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment allowance, it cannot be said that term "industry" would be confined to activity in a factory. What is to be seen is whether activity of the assessee results in manufacture or production of an article or thing. If the answer is in affirmative, the undertaking in question would be regarded as "industrial undertaking" for the purpose of grant of investment allowance. 13. The crucial question to be decided is whether the activity of the assessee resulted in manufacture or production of an article or thing, not being an article or thing specified in the list in the Eleventh Schedule. The object which is produced by the assessee is enlarged or reduced or size to size copies of the documents of the customers. These copies are obviously not mentioned in the list in the Eleventh Schedule. The crucial question is whether the activity results in "production of an article or thing". In other words, the question is whether copy that comes out can be said to have been "produced" and whether the said copy was an "article" or "thing" as mentioned in the relevant clause in sec. 32A. 14. We are of the opinion that decision of Gujarat High Court in CIT v. Ajay Printery (P.) Ltd. [1965] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which would come within the ambit of "manufacture of goods" would inevitably come within the ambit of "production of article or thing". Every manufacture of article is production of article although every production of article may not be manufacture of article. Consequently on the basis of the above decision it must be held that the assessee was engaged in the activity of "production of article or thing" within the meaning of that expression in Sec. 32A of the Act. 17. On the question of distinction between manufacture of an article and production of an article, the decision of Allahabad High Court in Singh Engg. Works (P.) Ltd. v. CIT [1979] 119 ITR 891 to which our attention was drawn on behalf of assessee is significant. It is expressly laid down therein that broad distinction between manufacture and production was that manufacture Involved bringing into existence of a new product, a product which is of a different chemical composition or whose integral structure was different from the raw materials while production as distinguished from manufacture, was nothing except bringing Into existence a product after processing the raw materials in a manner which might not change th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2(7)(d) in the sense of articles for sale. 20. In this connection, we may point out that it has also been observed in said decision that it was well established that in the absence of any definition in the statute words occurring in the statute would have to be understood with reference to the objects of the acts and in the context in which they occur. Consequently, interpretation put on the words in one statute could not automatically be imported for interpreting the same words in another statute. In the present case copies which are produced from the machines in question are sold to the customers. It is not necessary that the copies should be articles which could be sold in the open market to any other person. In this connection, we may refer to the decision of the Bombay High Court in the case of CIT v. Pressure Piling Co. (India) (P.) Ltd. [1980] 126 ITR 333 in which expression "manufacture or production of articles" within the meaning of see. 84(2)(iii) of the Act was interpreted. The following observations in said decision are relevant for our present discussion : "It is difficult to see how the product which ultimately results from the piling process cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n running an automobile workshop, repairs engines-Popular Garage v. ITO [1986] 16 ITD 677 (Coch.) ; (iv) when the assessee running a hotel prepared food-Hotel Banjara Ltd. v. ITO [1986] 16 ITD 692 (Hyd.) ; (v) when the assessee who was a Clinical Bio-Chemist took blood or urine from patients and prepared slides of culture and examined blood or urine and gave a report-Dr. P.S. Pargonkar v. ITO [1986] 16 ITD 170 (Hyd.) (SMC) ; and (vi) when the assessee after purchasing chillies sorted, graded, clipped and stemmed them in order to prevent deterioration and with a, view to give better polish and appearance Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73 (Mad.) the assessee was not entitled to investment allowance u/s 32A. The facts in such cases do not resemble the facts with which we are concerned. Consequently, such decisions are of no assistance. Considering the entire circumstances, we are of opinion that the assessee was engaged in the business of production of article or thing within the meaning of sec. 32A(2)(iii) of the Act. 22. The next question to be decided is whether the machines in question could be regarded as office appliances within the meaning of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenses Incurred on these two cars came to Rs. 46,014 for the assessment year 1982-83 and Rs. 47,937 for the assessment year 1983-84. For the A.Y. 1982-83 the ITO estimated 1/3rd of the total expenses as expenses for personal Use. The expenses for personal use thus came to Rs. 15,338. The ITO deducted Rs. 4,800 paid by the two directors to the assessee for personal use of the cars from the above amount and disallowed the balance of Rs. 10,538 in the computation of profits and gains of the business For A.Y. 1983-84 the disallowance made by the ITO came to Rs. 9,578. The assessee went in appeal before the CIT(A) against the said disallowance. The CIT(A) confirmed the disallowance of Rs. 10,538 in his order for the A.Y. 1982-83 for reasons given by him in his order for the assessment year 1981-82. In his order for A.Y. 1983-84 the CIT(A) reduced the total expenses of Rs. 47,934 by Rs. 4,800 and 1/5th of the balance of Rs. 43,134 amounting to Rs. 8,627 was estimated by him as expenditure for personal use which was required to be disallowed. Thus, for the A.Y. 1983-84 he reduced the disallowance of Rs. 9,578 made by the ITO to Rs. 8,627. The assessee has now come in further appeals b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee-company. There is, thus, apparent conflict on this point between the two Benches of the Tribunal. This conflict has not been referred to the Special Bench but we have to resolve the same while disposing of these appeals. 28. After considering the entire circumstances, we find that the expenses must be regarded to have been incurred wholly and exclusively for the purposes of business. Disallowance u/s 37(1) of the Act could not be made in respect of those expenses. It is not disputed that if the cars had been owned by the assessee, the expenditure attributable to personal use of the cars by the directors would have been required to be included in the computation for disallowance u/s 40(c) of the Act, and such expenditure would not have been disallowed u/s 37(1) of the Act. Mere fact that cars belonged to the directors would not make any difference in the legal position. This is because, nature of expenditure is identical, viz. for maintenance of the cars. The cars have been maintained for business purpose and the fact that part of the expenses would be attributed to personal use of the cars by the directors would mean that said part of the expenditure constituted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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