2004 (2) TMI 18 - HC - Income Tax

Whether, the Appellate Tribunal was right in holding that the activity of construction of building, etc., is an industrial undertaking for the purpose of section 80-I of the Income-tax Act, 1961? - We hold that the asses-see, which is engaged in the business of construction, is not entitled to deduction under section 80-I of the Act. Accordingly, the question is answered in the negative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues:
Claim for deduction under section 80-I of the Income-tax Act for the assessment year 1985-86 disallowed by the Income-tax Officer. Commissioner of Income-tax (Appeals) accepted the claim of the assessee. Revenue appealed before the Tribunal against the order of the Commissioner of Income-tax (Appeals). Tribunal dismissed the Revenue's appeal and rejected the application seeking reference of the question of law to the court.

Analysis:
The judgment pertains to a petition filed by the Revenue under section 256(2) of the Income-tax Act, 1961, seeking direction to the Income-tax Appellate Tribunal to refer a question of law arising from its order dated June 11, 1991. The question was whether the construction activity carried out by the assessee company qualifies as an industrial undertaking for the purpose of claiming deduction under section 80-I of the Act.

The assessee, engaged in construction activities, claimed deduction under section 80-I for the assessment year 1985-86. The Income-tax Officer disallowed the claim, stating that the assessee was not an industrial undertaking involved in the manufacture or production of any article or thing. However, the Commissioner of Income-tax (Appeals) accepted the claim, leading to the Revenue's appeal before the Tribunal.

The Tribunal's order was based on the interpretation of section 80-I, which is analogous to section 80HH. The Tribunal's decision was contrary to the law laid down by the apex court in previous cases. The court noted that the construction of a dam, bridge, or building as a whole does not amount to the manufacture or production of an article or thing, as established in previous apex court judgments.

Despite the standard procedure of directing the Tribunal to refer the question of law, the court decided to answer the question directly based on the facts available in the Tribunal's order. Citing a decision of the Delhi High Court, the court emphasized that when the facts are undisputed and sufficient to address the legal question, there is no need for a formal statement of the case.

In alignment with the apex court precedents, the court held that the assessee, engaged in construction business, is not eligible for deduction under section 80-I of the Act. Consequently, the question was answered in favor of the Revenue and against the assessee. As the assessee did not appear despite being served, no costs were awarded.