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TMI Blog2016 (7) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... 0HH and 80I of the Act." 3. We have heard arguments of both the sides and carefully perused the relevant materials placed on record interalia order of Hon'ble High Court dated 27.4.2009 (supra) and other relevant orders and judgment as relied by both the parties. 4. The Ld. Counsel for the assessee contended that as per para 2 of High Court order besides construction work of railway line the assessee company being a public sector company incorporated under companies Act and under administrative control of Ministry of Railways also engaged in the manufacturing of large no. of items and this fact has also been noted by the Tribunal at page 2 of last para for assessment year 1983-84 dated 20.8.1991 (hereinafter the Tribunal order). The Ld. Counsel vehemently pointed out that as per the Hon'ble High Court order (supra), it has been decided that the assesee is not eligible for deduction in respect of the income earned from construction activities but the assessee is eligible for deduction u/s 80HH & 80I of the Act on the income accrued during the relevant period from the manufacturing activities and for this limited purposes calculation of exemption the limited issue should be restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon'ble Supreme Court, contended that construction is not a manufacturing activity and when the assessee is purely engaged in the construction activity then it is not eligible for deduction u/s 80HH and 80I of the Act. The Ld. CIT(DR) contended that the observation of Hon'ble High Court in para 32 are based on factually incorrect arguments as such argument was not properly contravened by the Ld. Standing Counsel of the department appearing before Hon'ble High Court. 6. Placing rejoinder the above contentions of revenue , the Ld. Counsel for the assessee pointed out that the Ld. CIT(DR) wants to say that the case of the revenue was not placed properly by the Ld. Standing Counsel before Hon'ble High Court which is not permissible as per ethics of court arguments as the ability of High Court officer can not be challenged on doubted by the lower court officer appearing before the Tribunal on behalf of the Department. The Ld. Counsel also pointed out that the assessee claimed entire 100% income as deduction u/s 80HH & 80I of the Act but the claim regarding construction activity has been denied by the Hon'ble High Court, however, the claim of deduction in respect of manufacturing acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producing an article or articles,' as the case may be." The Court therefore, explained the meaning of the words 'manufacture', 'production' and 'articles' and held as under :- "The word "production" or "produce" when used in juxtaposition with the word "manufacture" takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products which emerge in the course of manufacture of goods. The next word to be considered is "articles", occurring in the said clause. What does it mean? The word is not defined in the Act or the Rules. It must, therefore, be understood in its normal connotation - the sense in which it is understood in the commercial world. It is equally well to keep in mind the context since a word takes its colour from the context. The word "articles" is preceded by the words "it has begun or begins to manufacture or produce". Can we say that the word "articles" in the said c1ause comprehends and takes within its ambit a dam, a bridge, a building, a road, a canal and so on? We find it difficult to say so. Would any person who has constructed a dam say tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -HH and 80-1 on the strength of such manufacturing activity. On the contrary, the assessee was seeking benefit under the aforesaid provisions on the strength of manufacturing activity carried on by the assessee, namely, manufacture of numerous items, parts, components, etc. which go into the working and operational railway tracks. In this behalf, he had relied upon the following observation of the Supreme Court in N.C. Budhiraja (supra) :- "It may be that the respondent is himself manufacturing some of the articles like gates, windows and doors which go into the construction of a dam but that makes little difference to the principle. The petitioner is not claiming the deduction provided by section 8OHH on the value of the said manufactured articles but on the total value of the dam as such. In such a situation. it is immaterial whether the manufactured articles which go into the construction of a dam are manufactured by him or purchased by him from another person. We need not express any opinion on the question what would be the position if the respondent had claimed the benefit of section 80HH on the value of the articles manufactured or produced by him which articles have gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of articles which go or used for construction, would be admissible or not and the same was left open. Subsequently, in para 34 of the Act the Hon'ble High Court set aside the issue to the Tribunal for re-examination of the issue in view of the parameters laid down by the Hon'ble Apex Court in the case of N.C. Budhiraja (supra). 9. On the basis of foregoing discussion in our humble understanding the sole question for our adjudication is as follows : "whether the assesee is eligible for the deduction u/s 80HH and 80I of the Act in regard to the profits accrued to it from manufacturing activity, if any, carried out by it during the relevant financial periods ?" 10. From last para at page 2-3 of the Tribunal order dated 20.8.1997 for asstt. year 1983-84 the activities of the assessee companies has been noted as follows :- "The assessee submitted its detailed reply to the said notice vide its communication to the CIT dated 24th of March, 1988. In paragraph of this communication it has been submitted that the company manufactures or produces various articles such as, ballast, concrete sleepers, specialized mechanical track laying/relaying equipments, railway panels, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in view of the facts noted by the Tribunal in the order dated 20.8.19991 (supra) and in para 2 of Hon'ble High Court order remanding the issue to Tribunal (supra) it is amply clear that the Tribunal as well as Hon'ble High Court noted and observed that besides construction activity the assessee is also engaged in manufacturing of large number of various items which are used in the installation and fabrication of railway tracks. 14. We decline to accept vehement contention of Ld. CIT(DR) that since the entire claim of the assessee of deduction u/s 80HH & 80I of the Act has been dismissed by the High Court then there is no point to decide eligibility of same on the manufacturing activities. Because in our humble understanding of the ratio of Hon'ble High Court order (supra) if the Hon'ble High Court was inclined to dismiss entire claim of the assessee then there was no need to send the case to the Tribunal for reexamination of the issue of allowability of claim of the assessee in regard to income earned from manufacturing activities as noted by their Lordship in para 31 to 34 (as reproduced above) keeping in view the parameters laid down by Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income earned from construction activities but their Lordship refrain themselves from expressing any opinion on the question that what would be the position if the responded had claimed the benefit of section 80HH on the value of the articles manufactured or produced by it which articles have gone or used or consumed in the construction. When we proceed to analyse and re-examine the issue in view of the directions to Tribunal by Hon'ble High Court order (supra) then we note that this issue has to be re-examined and considered in the context of provisions of section 80HH of the Act. The clause (i) of sub section 2 and subsection (i) section 80HH of the Act mandates as follows :- 2180HH. (1) Where the gross total income of an assessee includes any profits and gains derived22 from an industrial undertaking22, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. xx xx xx 4) The deduction specified in sub-section (1) shall be allowed in computing the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they denied deduction not only on the income from construction activity but also dismissed prayer of deduction on manufacturing activities. We are not agree with the contention the Ld. CIT(A) and subsequently raised by Ld. CIT(DR) that there might be a minor activity of manufacture of articles buy the purpose of the activity is to complete the main project of laying railways track / line as when the provisions of the Act mandates that the assessee is eligible for deduction pertains to income accrued from manufacturing activities then in our considered view, the manufacturing activity was an integral part of entire activity and namely for the reason that such an activity was not very significant compared to total turnover of the assessee it could not be said the assessee not engaged in manufacturing activity. In the provision of 80HH of the Act, as noted above, it is mandated that where the total gross income of an assessee includes any profits and gains derived from an industrial undertaking then this section of deduction applies. In the present case also the gross total income of the assessee includes income from manufacturing activity of an industrial undertaking irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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