Income-tax---

----Special deduction---Industrial company--- "Manufacture or processing of goods", meaning of ---Assessee-company engaged in the business of construction of roads and buildings---Not an industrial company---Not entitled to deduction under Ss.80-HH & 80-I---Indian Finance Tax Act, 1981, S.2(7)(c)---Indian Income Tax Act, 1961, Ss.80-HH & 80-I.

The assessee-company was engaged in the business of construction of roads and buildings, particularly industrial sheds. On the question whether for the assessment years 1984-85 and 1985-86, the assessee-company was entitled to deduction under section 80-HH and section 80-I of the Income Tax Act, 1961:

Held, that the assessee-company was engaged only in the business of construction of roads and buildings and, therefore, it was not an industrial undertaking. The Tribunal was right in holding that the assessee-company was not entitled to deduction under sections 80-HH and 80-I of the Act.

CIT v. Oricon (Pvt.) Ltd. (1989) 176 ITR 407 (Bom.) ref.

S.M. Dagaonkar for the Assessee.

D.D. Vyas for the Commissioner.

JUDGMENT

A.R. TIWARI, J.---At the instance of the assessee, the Tribunal has stated the case and referred the undernoted question of law arising out of the order passed by the Tribunal in IT As. Nos. 716/(Ind) of 1987 and 257/(Ind) of 1989 for the assessment years 1984-85 and 1985-86 on applications registered as R. As. Nos.7 and 8/(Ind) of 1991, for our opinion, under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"):

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-company was not entitled to deductions under sections 80-HH and 80-I since the business of construction of -roads and buildings did not bring it within the category of an 'industrial undertaking' ?"

Briefly stated, the facts of the case are that the assessment years are 1984-85 and 1985-86 previous year ending on December 31, 1983, and December. 31, 1984, respectively, The assessee is a private limited company engaged in the business of construction of roads and buildings, particularly, the industrial sheds. The Income-tax Officer allowed deduction of Rs.19,572 under section 80-HH of the Act but declined deduction under section 80-I of the Act in the year 1984-85. However, in view of the order passed by the Commissioner of Income-tax (Appeals) for the assessment year 1984-85, the Income-tax Officer did not allow the deductions under sections 80-HH and 80-I of the Act (Annexures "A-1" and "A-2"). The assessee then filed appeals before the Commissioner of Income-tax (Appeals). He by order dated July 2, 1987, for the assessment year 1984-85 held that the assessee-company was not industrial undertaking and, therefore, was not entitled to any deduction either under section 80-HH or 80-I of the Act. He, therefore, not only dismissed the contention of the assessee as to the disallowance of deduction under section 80-I but also withdrew the deduction of Rs.19,572 which was made under section 80-HH of the Act. The income of the assessee was thus enhanced by Rs.19,572. The appeals were dismissed (Annexures "B-1" and "B-2"). The assessee then filed second appeal before the Tribunal against both the orders of the Commissioner of Income-tax (Appeals). The Tribunal held that allow ability of the claim of deduction under sections 80-HH and 80-I of the Act was permissible only if the assessee was found to be industrial undertaking. The Tribunal reached the conclusion that the assessee-company was not entitled to be treated as industrial undertaking. The appeals were dismissed (Annexure "C"). The assessee then filed application under section 256(1) of the Act. On these applications, the Tribunal stated the case and referred the aforesaid question for our consideration and opinion. .

We have heard Shri S.M. Dagaonkar, learned counsel for the applicant/assessee, and Shri D.D. Vyas, learned counsel for the non- applicant/Department.

Section 80-HH of the Act permits certain deduction in respect of profits and gains from newly-established industrial undertakings or hotel business in backward area. Section 80-1 of the Act permits deduction in respect of profits and gains from industrial undertakings after a certain date, etc.

It is thus clear that in order to claim deduction, the assessee was required to show that it was an industrial undertaking, i.e., industrial company. "Industrial company" is defined in the Finance Act of 1981 as under:

" '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."

In Kanga and Palkhivala's Law and Practice of Income Tax, Eighth Edition, it is stated as under:

"Industrial activity is the genus; manufacture (used here to include production) or processing of goods is the species. All manufacturing activities are industrial; but all industrial activities do not necessarily involve manufacture. Usually an industrial activity involves the manufacture or processing of goods. However, in some cases it does not; and such cases would not be covered by the statute if manufacture or processing of goods is a requirement of the section. "

The law is luculent and presents no case to tear up any type of tenebrosity. All the aspects have been vividly discussed and considered in CIT v. Oricon (Pvt.) Ltd. (1989) 176 ITR 407 (Bom.) and ITO v. Hydle Constructions (P.) Ltd. (1983) 6 ITR 575 (Delhi).

Applying the test to the case on hand, we are satisfied that the assessee has failed to prove itself to be an industrial undertaking so as to obtain any benefit under sections 80-HH and 80-I of the Act. It is engaged only in the business of construction or roads and buildings and is, thus, not capable of being categorised as industrial undertaking.

Counsel for the applicant was unable to show, us any activity of the assessee which may earn the insignia of industrial undertaking.

On appreciation of the facts as presented, the Tribunal concluded that the assessee was not an industrial undertaking and was thus disentitled to obtain the deductions under the aforesaid provisions. This conclusion is not shown to be perverse or inconsistent with law.

That being so we are satisfied with the correctness of the order passed by the Tribunal.

Ex consequenti, we hold that the Tribunal was right in its conclusion that the assessee-company was not entitled to deductions under sections 80-HH and 80-I of the Act as the business of the assessee-company did not bring it within the category of industrial undertaking.

We, therefore, answer the question in the affirmative, i.e., in favour of the Department and against the assessee.

This miscellaneous civil case, thus, stands disposed of in terms indicated above, but without any order as to costs.

Counsel fee for each side is, however, fixed at Rs.750, if certified.

Transmit a copy of this order to the Tribunal in accordance with the law.

M.B.A./1627/FCOrder accordingly.