1985 (10) TMI 123 - AT - Income Tax

Summary

Issues:
- Entitlement to deduction under section 80HH of the Income-tax Act, 1961 for a firm engaged in constructing dams.
- Conflict between rulings of different High Courts regarding the definition of 'manufacture of goods or articles' under the Act.
- Applicability of previous judgments in determining eligibility for deduction under section 80HH.

Analysis:
The judgment pertains to an appeal by the department and a cross-objection by the assessee arising from the Commissioner (Appeals) order for the assessment year 1978-79. The central issue revolves around whether a firm engaged in constructing dams is entitled to deduction under section 80HH of the Income-tax Act, 1961. The Income Tax Officer (ITO) denied the deduction, while the Commissioner (Appeals) ruled in favor of the assessee.

The Tribunal considered the arguments presented by both parties. The departmental representative relied on the Full Bench order in ITO v. Hydle Constructions (P.) Ltd., asserting that the end product, a dam, does not qualify as an article under section 80HH(2)(i). In contrast, the assessee's counsel urged the Tribunal to follow the decision of the Bombay High Court in CIT v. Hindustan Antibiotics Ltd., emphasizing the interpretation of 'manufacturing articles' in the context of the Act. The Tribunal noted the differing views of the Bombay and Gujarat High Courts on the definition of 'manufacture of goods or articles.'

Further, the Tribunal analyzed the Bombay High Court ruling in CIT v. Shah Construction Co. Ltd., which dealt with a case under a different provision. The High Court clarified that construction activities like building and bridges do not constitute manufacturing goods. The Tribunal concluded that the construction of buildings and bridges does not amount to the manufacture of goods or articles, aligning with the Bombay High Court's decision. Consequently, the Tribunal held that the assessee was not entitled to the section 80HH deduction, overturning the Commissioner (Appeals) order and reinstating that of the ITO.

In light of the discussion and findings, the cross-objection filed by the assessee was deemed infructuous. The department's appeal was allowed, and the assessee's cross-objection was dismissed. The judgment underscores the importance of precedent and judicial interpretation in determining the eligibility for tax deductions under specific provisions of the Income-tax Act, 1961.