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TMI Blog1985 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, it was held that the construction of buildings also involved manufacturing processes, like moulding of R. C. C. slabs, fabrication of steel doors and steel windows, It was observed by the Tribunal that though the assessee did not market these goods, it employed machinery for doing the work as part of the building process. The Tribunal held that the assessee was engaged in the manufacture and processing of goods. It was accordingly held that the concessional rates of income-tax specified in section 2(6)(c) of the Finance Acts of 1971 and 1972 were applicable to the assessee and the chargeable rate was 55%. The question referred to us in the two assessment years is as follows : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee company was an industrial company entitled to be taxed at the concessional rates prescribed under section 2(6)(c) of the Finance Acts of 1971 and 1972 for the assessment years 1971-72 and 1972-73 ? " The view of the Tribunal has been challenged before us by the Department and a large number of cases have been cited at the Bar by both sides. The only question involved in this case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Germany is a process of manufacturing. We do not see how this judgment is of any help in the present case. In CIT v. Pressure Piling Co. (India) Ltd. [1980] 126 ITR 333 (Bom), the assessee company was using a manufacturing process for laying foundations for buildings by pressure piling. The question was whether relief under section 84 (now section 80J) was to be allowed to the assessee as an " industrial undertaking ". It was held that the assessee was engaged in either manufacturing or production. The definition in section 84 (or section 80J) is quite different and so this judgment does not help much. A more relevant case decided by the Bombay High Court is CIT v. N. U. C. Private Ltd. [1980] 126 ITR 377. In that case, the court interpreted the definition of " industrial company " to mean that it covers only construction of ships and not construction of anything else. It was also held that the making of doors and window frames, concrete beams and slabs was a step in the construction of a building. The business could not be divided into two parts : (a) making of windows and doors, and (b) construction. It was accordingly held that the assessee fell outside the definition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entitled to exemption under section 15C of the Indian Income-tax Act, 1922. For the purpose of section 23A of the Indian Income-tax Act, 1922, a firm printing balance-sheets, profit and loss accounts, dividend warrants, pamphlets, share certificates, etc., was held to be a manufacturer of goods in CIT v. Ajay Printery Private Ltd. [1965] 58 ITR 811, decided by the Gujarat High Court. Most of the other judgments cited before us relate to the concessions which are available to industrial undertakings under the provisions which correspond to section SOJ of the present Income-tax Act. One of these judgments has to be referred to by us as it is the main judgment relied upon by the assessee. This is the case of National Projects Construction Corporation Ltd. v. CWT [1969] 74 ITR 465 (Delhi). This was a case involving the application of section 45(d) of the Wealth-tax Act, 1957, which provided that the Act shall not apply to a company established with the object of carrying on an industrial activity. An industrial undertaking was defined as an undertaking engaged in the manufacture, production or processing of goods. The assessee in that case was engaged in the construction of barr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the building work. On the other hand, to give a meaningful purpose to the Act, it must be understood that the definition is to operate in respect of companies which are " industrial companies " in the proper sense, i.e., they must be manufacturing or processing goods. In this case, the assessee consumes doors and windows and bricks in making buildings. It cannot be described as a manufacturer or processor in respect of this activity. Of course, as we are to determine whether the assessee is an industrial company, we have to examine whether the definition applies to the assessee. If we examine the definition as a whole, the concessional rate is available to a company engaged in the generation or distribution of electricity or any other form of power. An electric supply company or a gas supply company or any such power supply company will be treated as an industrial company. Similarly, companies engaged in the construction of ships or in the manufacture or processing of goods, or in mining, are also to be treated as industrial companies. It so happens that the assessee uses bricks manufactured by others in making buildings. It also makes R.C.C. slabs, etc., in the process of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, construction was the main object and the process of manufacture of doors and windows was an ancillary object. This view was accepted again in that High Court in the case of Shah Construction Co. Ltd. [1983] 142 ITR 696. It seems reasonable to apply the definition in the same way as the Bombay High Court unless there is something very wrong in the interpretation of the Act. Learned counsel for the assessee had urged that an interpretation favourable to the assessee should be accepted if there are two possible views. We accept this. However, inasmuch as the assessee is a manufacturer of buildings or constructor of buildings, an intermediary stage should not be taken to convert the assessee into a manufacturer of goods. A transitory or evanescent product like an R.C.C. block or a door is only a step towards making the whole building. It would not be reasonable to say that the assessee is a manufacturer or processor of goods as understood in common parlance, in the context of the definition of " industrial company " given in the Finance Acts of 1969 and 1970. If we look at some other definition like the definition of " industrial undertaking " in section 80J of 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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