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TMI Blog2003 (9) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment proceedings, it is explained on behalf of the assessee-company that erection and fabrication of dish antenas is an industrial activity and therefore profit earned from such activity is eligible for deduction under s. 80-I. The AO however was of the opinion that the execution of such contact cannot be construed as an industrial undertaking within the meaning of s. 80-HH(2) and erection or fabrication of dish antennas cannot be termed as manufacture of any article or thing. He therefore disallowed the claim of the assessee for deduction under s. 80-I relying on the decision of Hon ble Supreme Court in the case of CIT vs. N.C. Budharaja Co. Anr. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC). The matter was carried before the learned CIT(A) and during the course of appellate proceedings before him, it was submitted on behalf of the assessee-company that it had constructed a factory shed of about 2000 sq.ft. for executing the aforesaid contract of supply, fabrication, erection and commissioning of 15 Nos. of dish antennas of 45 mtrs. diameter. It was also submitted that various equipments such as cranes, vertical lathe machine, pipe cutting machine, etc. wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he execution of TIFR contract by the assessee-company involved erection and fabrication of 15 Nos. of dish antennas and having regard to the scope of work of the said contract, the AO was right in treating the said activity to be not a manufacturing activity relying on the decision of the Hon ble Supreme Court in the case of CIT vs. N.C. Budhiraja Co. He contended that such an activity involving erection and fabrication work cannot be considered as manufacturing or production of article for the purpose of allowing deduction under s. 80-I. He also contended that the words used in the relevant provisions of s. 80-I are specific and as held by the Hon ble Supreme Court in the case of CIT vs. N.C. Budhiraja Co., the object of introduction of the said provisions in the statute has to be gathered from the reasonable interpretation of the plain language used by the legislature. He further contended that in order to be eligible for deduction under s. 80-I, the assessee must be engaged in the activity of manufacturing or producing an article or thing and any ancillary or incidental activities cannot be considered as manufacturing or production of article or thing so as to claim benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, there was requirement of production line system to be adopted for accurate and precision fabrication/assembly. The total weight of the dish antenna is approx. 82 tonnes excluding a counter-weight of 34 tonnes which is used for balancing the antenna during elevation moments. Entire dish antenna is mounted on a 12 mtr. high RCC tower approximately 5 mtr. is diameter at the top. Construction of these RCC towers was awarded by TIFR to another contractor and was not within the scope of the company. The entire system has a large quantum of electronic gadgetory for receiving the radio signals from outer space and conversion to light waves, transmission to control laboratory through optical fibre cables, reconversion to electro-magnetic waves and final recording and studies by use of advance models of computers. From the above, it will be very clear that the contract is really a mechanical engineering contract involving fabrication, erection and commissioning and has no content of civil engineering work. As the 15 antennas are same type, the production work is also of repetitive nature where the same items are to be produced for 15 antennas and hence one can conclude that the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o manufacture and consequently the assessee is entitled to deduction under ss. 80-HH and 80-I. He also invited our attention to a copy of TIFR contract placed at page Nos. 28 to 52 of his paper book and explained the scope of work with reference to description given therein. He further invited our attention of order No. 10/90 issued by the Ministry of Finance, Govt. of India exempting the execution of project/contract executed by the assessee-company for TIFR from excise duty. His submission in this regard was that but for the exemption granted by the Govt. of India, the said activity of the assessee-company would have been liable to excise duty which again supports the assessee s claim that the same was a manufacturing activity. He contended that the execution of TIFR contract by the assessee-company thus mainly involved manufacturing activity and the learned CIT(A) was fully justified in directing the AO to allow deduction in respect of the same under s. 80-I. In support of this contention, he relied on the decision of the Hon ble Bombay High Court in the case of CIT vs. Tata Locomotive Engineering Co. Ltd. (1968) 68 ITR 325 (Bom) as well as that of Madras Bench of Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntennas and such dish antenna being a movable item, constituted article or thing as explained by the Hon ble Supreme Court in the case of CIT vs. N.C. Budhiraja Co. for the purpose of s. 80-I. It is worthwhile to note here that the Hon ble apex Court in the case of CIT vs. N.C. Budhiraja Co. did not express any opinion on the question of what would be the position if the assessee had claimed the benefit under s. 80HH on the value of the articles manufactured or produced which were used/consumed in the construction of the dam. 8. In this context, the learned Departmental Representative had relied on the decision of Hon ble Delhi Court in the case of Bhagat Construction Co. (P) Ltd. vs. CIT wherein it was observed by their lordships of Delhi High Court that an assessee may be engaged in the activity of building work as a contractor and in the process of completing that work some manufacturing may be done at interim stages, but the product of such manufacturing activity would not result in the production of goods since such products would be consumed by the assessee in its building work. The Hon ble Delhi High Court therefore held that the assessee engaged in civil constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means the price that such goods would ordinarily fetch on sale in the open market." From a perusal of the aforesaid provisions, it is evident that if any goods manufactured by the assessee in his industrial undertaking are transferred to any other business carried on by the assessee, the profits gains on such goods would be eligible for deduction under s. 80-I having regard to its market value. It is thus clear that the decision of Hon ble Delhi High Court in the case of Bhagat Construction Co. (P) Ltd. vs. CIT rendered in the context of deduction on account of investment allowance under s. 32A is not applicable to the present case involving the issue relating to deduction under s. 80-I. 9. In any case, the contract awarded by the TIFR to the assessee-company involved supply, fabrication, erection and commissioning of 15 nos. of dish antennas and having regard to the scope of work defined in the said contract, such dish antenna was not just an intermediary product but was a final product and manufacturing of such dish antennas comprising of various components as explained by the assessee in the written submission filed before the learned CIT(A) in a separate unit set up at t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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