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TMI Blog1982 (3) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... red at Rs. 10,02,050. A revised return was filed on17-1-1980 declaring income at Rs. 8,17,033. Before the ITO the assessee made three claims. The first claim was that the assessee should be treated as an industrial company in which public are not substantially interested and the rate of tax should be charged at 60 per cent instead of 65 per cent. Such a contention had not been accepted by the ITO as also the Commissioner (Appeals) in the assessment year 1976-77 and, therefore, this contention was not accepted in this year also. The second and third contentions were that deductions under sections 80J and 80HH should be allowed to the extent of Rs. 1,85,017 and Rs. 2,53,773, respectively. These contentions were also not accepted because according to the ITO, the assessee was not an industrial undertaking. 2. Aggrieved, the assessee filed an appeal to the Commissioner (Appeals) and submitted that the assessee should be treated as an industrial company and deduction under sections 80J and 80HH, as claimed, should be allowed as the assessee was an industrial undertaking carrying on business in a number of articles. The Commissioner (Appeals) did not accept the assessee's submission be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducing goods the assessee need not have its own machinery or plant. For the same submission he referred to the judgment in Addl. CIT v. A. Mukherjee Co. (P.) Ltd. [1978] 113 ITR 718 (Cal.), wherein it has been held that in order that a publisher of books should be a manufacturer of books it is wholly unnecessary for him to be a bookbinder himself. He submitted that if plant and machinery was not a requirement for manufacture or production of goods, then it would follow that workers also need not be employed by the assessee for those jobs which were got done from artisans. He also referred to the judgment in Orient Longman Ltd. v. CIT [1981] 130 ITR 477 (Delhi) wherein the assessee-company, a publisher of books, was held to be an industrial company. He submitted that the conditions laid down under sections 80J(4) and 80HH(2) were fully satisfied and, therefore, the assessee should be allowed deduction both under sections 80J and 80HH. He also referred to the order dated22-10-1980in IT Appeal No. 265 (Coch.) of 1978-79 of the Cochin Bench of the Tribunal, wherein section 80HH relief was allowed to an assessee, who was exporting shrimps to foreign countries. This judgment was partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possess its own plant and machinery. For purposes of determining that the assessee is an industrial company the words to be considered are "engaged... in the manufacture or processing of goods...". We are holding the assessee-company to be an industrial company as the word "processing" is also used in the definition of "industrial company". 5. We are, however, unable to accept the assessee's further submission that it should be held to be a new industrial undertaking also. Under section 80J(1), in computing the total income of an assessee, deduction is allowed at the rate of 6 per cent of the capital employed in the industrial undertaking. Section 80J(2) provides that the deduction specified under section 80J(1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles. Section 80J(4) lays down the following conditions : "(4) This section applies to any industrial undertaking which fulfils all the following conditions, namely:--- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is thus clear that for obtaining the deduction under section 80J, the industrial undertaking has itself to manufacture or produce articles. The learned counsel for the assessee had argued that so long as the manufacturing of goods was done under the assessee's supervision, it should be held that the assessee itself was manufacturing articles as required by section 80J. In Chowgula Co.(P.) Ltd. v. Union of India 1981 Tax LR 2929 (SC), it has been held that the test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. In that case blending of different kinds of ores was not considered to be manufacturing of ore but the blending of ores of different qualities was considered to have undergone processing. Now, when the assessee buys semifinished goods from the artisans and then gives those goods for engraving, scraping, colouring, polishing and numbering, etc., it cannot be said that the original commodity (semi-finished articles) has become a new and distinct commodity. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is also distinguishable. The judgment in Orient Longman Ltd. also deals with the definition of industrial company for the relevant year. That judgment also does not help the assessee. The judgment in Farrukhabad Cold Storage (P.) Ltd. also does not help the assessee. 7. The next question for consideration is whether the assessee is entitled to deduction under section 80HH. This section provides a certain deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. The conditions for deduction are laid down in sub-section (2) which reads as under : "(2). This section applies to any industrial undertaking which fulfils all the following conditions namely :--- (i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970, in any backward area ; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area ; Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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