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Issues involved: Interpretation of whether the assessee-company engaged in the manufacture or production of articles for tax relief under section 84(1) of the Income-tax Act, 1961 for the assessment years 1963-64 and 1964-65.
Summary: The case involved a private limited company utilizing a specialized patented method known as "pressure piling" for laying building foundations. The dispute centered around whether this process qualified as manufacturing or production of articles under section 84(2)(iii) of the Income-tax Act, 1961, for tax relief purposes. The Income Tax Officer (ITO) initially denied the company relief under section 84, a decision upheld by the Appellate Authority Commissioner (AAC). However, the Appellate Tribunal had conflicting opinions between the Accountant Member and the Judicial Member. The Accountant Member deemed the company engaged in manufacturing piles and eligible for relief, while the Judicial Member viewed pressure piling as construction work, not manufacturing. The matter was referred to a third Member of the Tribunal, who concluded that the company's activities qualified as manufacturing, entitling them to tax relief under section 84(1). The High Court analyzed the relevant provisions of section 84 and emphasized that the critical question was whether the product resulting from pressure piling could be classified as an article and if it was manufactured or produced by the company. The Court rejected the argument that the location of manufacturing was determinative, asserting that the essence of manufacturing lies in transforming raw materials into a new commodity. It was determined that the end-product of pressure piling, described as a pile, constituted an independent article produced through a specialized process. Therefore, the Court upheld the decision that the company qualified for tax relief under section 84(1) of the Act. In conclusion, the High Court answered the referred question affirmatively in favor of the assessee, stating that the company was entitled to the benefit of tax relief under section 84(1) for both assessment years.
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