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TMI Blog1984 (11) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... g categorised as manufacturing activities. The facts in this regard, the rival submissions and our conclusion thereon are discussed hereunder. 2. The assessee, a private trust, carried on the business of purchasing forest, felling the trees and converting them into logs and, subsequently, sawing them into timber of various sizes and varieties fit to be used in construction of buildings and also for being put to other uses inclusive of manufacture of furniture. The business operations of the assessee were carried on in a backward area. Deduction under section 80H was claimed in respect of the profits and gains derived from the industrial undertaking consisting of the above-mentioned operations. In the assessments completed on 5-10-1981, 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity was involved in the sale of firewood. He was of the opinion that all the activities of the assessee did not represent manufacturing activities and, therefore, he directed the ITO to examine each activity and allow deduction under section 80HH only in respect of those activities, which actually represented manufacturing of commodity. 5. Aggrieved with the same, the assessee is in appeal before us. The submissions made on behalf of the assessee may be summarised as under. The Commissioner failed to give a specific direction as to which activity of the assessee did not qualify for being categorised as manufacturing activity and, therefore, his order is illegal inasmuch as, he has left it to the ITO to make fresh enquiries in this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower to the ITO by setting aside the assessment. As to whether the operations in which the assessee was engaged, namely, purchasing of forests, cutting down the trees, making them into logs and finally converting them into planks of various sizes for use in various activities, would qualify for being categorised as manufacturing activities, the appellant's representative brought to our notice the following two decisions of the Calcutta High Court under the Sales Tax Act, wherein it was held that sawing of planks from timber or sizing the same amounts to manufacture and the person carrying on such business is a manufacturer. Our attention was also drawn to the second decision, wherein it has been held by the Calcutta High Court that chopping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking as it is nothing but an ingredient of the profits and gains derived from such undertaking. Finally, reliance was also placed on N.C. Budharaja Co.'s case and it was submitted that the assessee was registered under the Factories Act, 1948, as a saw mill was being operated. 6. On behalf of the revenue, the learned departmental representative made the following submissions : The Commissioner considered the entire deduction as erroneous and, therefore, set aside the assessments for being done after a thorough scrutiny in the light of the remarks made in his order and, therefore, there was no legal lacuna in the order of the Commissioner. The Commissioner had not confined himself to the profits generated by sale of firewood an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with the submission made on behalf of the assessee that the order of the Commissioner suffers from a legal lacuna, though, however, we agree with the submission that sawing of planks from timber or sizing the same, amounts to manufacture. For this, we rely on the decision of the Calcutta High Court in Shaw Bros. Co.'s case, where the question was whether the sawing and sizing of things into planks was a manufactured commodity. The contention on behalf of the appellant-assessee, in that case, was that by sawing the timber and producing planks of various sizes, no manufactured commodity had come into existence. The Calcutta High Court did not agree with this view. They held as follows : " When planks are sawed out of logs, what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Tribunal in Pondicherry Distilleries Ltd.'s case, we would hold that even sale of firewood would be eligible for deduction under section 80HH. It is needless for us to refer to N.C. Budharaja's case. In the above view of the matter, we are of the opinion that the activities of the assessee can be taken to be manufacturing activities inasmuch as, commercially viable commodities have emerged out of the same and, therefore, there was an industrial undertaking as required for the purpose of the deduction under section 80HH. In this view of the matter, we uphold the claim for deduction under section 80HH in respect of the profits of the industrial undertaking and cancel the orders of the Commissioner under section 263. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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