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TMI Blog1987 (2) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 13,844. The assessee filed an appeal against the aforesaid order before the Appellate Assistant Commissioner. In the said appeal the assessee contended that the amount declared as capital gains had been utilised by him for the construction of a lodging house. He further contended that the business of running the lodge is an industrial undertaking and since the capital gains arising from the compulsory acquisition of the land and building forming part of the ice factory, had been utilised for setting up the lodging house, the same was exempt from tax under section 54D of the Income-tax Act, 1961, for short, the Income-tax Act . The Appellate Assistant Commissioner, however, found that the business of running the lodge cannot be treated as an industrial undertaking within the meaning of section 54D of the Income-tax Act and hence the assessee is not entitled to the exemption. On further appeal, the Appellate Tribunal sustained the above finding of the Appellate Assistant Commissioner and, as a result of which, the second appeal was dismissed. The above question arises from the said order of the Appellate Tribunal. 3. That the assessee will be entitled to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, if an Act is directed to dealings with matters affecting everybody generally, the words used have the meaning attached to them in the common and ordinary use of language. (Vide Unwin v. Hanson, [1891] 2 QB 115 (CA), per Lord Esher M.R at page 119). That the Income-tax Act is of general application, is beyond dispute. It, therefore, follows that the meaning that should be given to these words industrial undertaking must be the natural meaning. It is all the more so because the Income-tax Act is one consolidating and amending the law relating to income-tax and super tax. (See Rao Bahadur Ravulu Subba Rao v. CIT, [1956] 30 ITR 163 (SC) at 169). Undertaking in common parlance means an enterprise , venture , engagement It can as well mean the act of one who undertakes or engages in a project or business' (Webster). An undertaking mentioned in section 54D must be one maintained by a person for the purpose of carrying on his business. Undertaking for the purpose of this section, however, must be an industrial undertaking The demonstrative adjective industrial qualifying the word undertaking unmistakably and with precision shows that the undertaking must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity with the help of employees, he submits. In other words he argues, an activity, vocation or business to be an industrial undertaking , within the meaning of the Income-tax Act, must be one which manufactures or produces articles. This construction alone is warranted in the context in which these words are used in the various sections in the Income-tax Act. He argues that if the words are thus understood, there is no scope for contending that these words have differently been used in section 54D of the Act. It, therefore, follows that the meaning suggested by the Revenue must be the meaning attributable to the said words in section 54D also. Manufacture or production is the sine qua non, to call an activity, vocation, business or trade, an industrial undertaking. Merely because an activity partakes of the character of an industry or has some connection with an industry in some way, it cannot be said that the said activity comes within the scope of the words industrial undertaking ; and such an extension of the words is unwarranted. These words cannot be dissociated from the primary significance thereof, which is manufacture or production, the learned counsel submits. In suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, are eligible for certain deductions while computing their assessable income. For instance, under section 33B, the rehabilitation allowance can be claimed only by an assessee who could establish that the industrial undertaking owned by him is one which satisfies the requirements prescribed by the Explanation appended to the section. The Explanation reads: In this section, industrial undertaking means any undertaking which is mainly engaged in the business of generation or distribution of elecricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. 10. This Explanation makes it abundantly clear that it is not every industrial undertaking that is entitled to the benefit envisaged in the section, but only such industrial undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture of goods, etc. An industrial undertaking, though it manufactures or produces articles, will none the less be not entitled to the tax concession prescribed under section 80J, unless the said industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above approach of the Revenue cannot be taken cognisance of. 12. The above discussion would make it abundantly clear that the argument of the Revenue that the words industrial undertaking must be given the meaning suggested by it, in our view, is not sustainable. These sections, instead of supporting the argument of the Revenue, in fact, cut at the root of its argument. 13. It should, therefore, be held that the lodging house. constructed by the assessee is an industrial undertaking within the meaning of the Act and since the assessee satisfies the requirements prescribed under section 54D, he is not liable to pay tax on the capital gains. 14. The Tribunal, however, has held that the running of a lodging house could not be considered as carrying on an industrial undertaking . This finding, in the light of the above discussion, is erroneous. 15. The question accordingly is answered in the negative, against the Revenue. We direct the parties to bear their respective costs in this tax referred case. 16. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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