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TMI Blog2001 (2) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the manufacturing and sale of electric transformers which were supplied by it to different State Electricity Boards. During the year under consideration, the assessee undertook to repair some old damaged transformers of electricity boards and claimed the rebate under ss. 80HH and 80-I on the net income declared at Rs. 4,44,321. The AO passed order under s. 143(3) on 15th March, 1996 and allowed the claim of the assessee. The learned CIT noticed that the claim of the assessee was not admissible as the repair work did not amount to manufacture and accordingly proceedings under s. 263 were initiated. The assessee filed written reply before the CIT justifying its claim of deduction under ss. 80HH and 80-I. The main thrust of the assessee was that it was a manufacturing concern and that the repair undertaken by it also involved the same processes as was required for manufacturing the transformers and for this, the assessee relied upon the terms and conditions entered into by it with the respective State Electricity Boards which inter alia, provided that: "The repair work shall involve opening of transformer cover, detanking core and coil assembly at PSEB premises for taking on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of these facts, the assessee is not entitled for deduction under ss. 80HH and 80-I in respect of the repair work undertaken by it on behalf of the State Electricity Boards as no new end-product comes out of the processes undertaken by the assessee as it simply undertakes repair work and supplies the spareparts. No manufacturing activities are involved in this process." It was further observed by the learned CIT that from the figures submitted by the assessee, it was clear that even deduction claimed by assessee in its return of income at Rs. 1,99,944 and allowed by the Department was also not correct. The repair work and labour charges thereon and scrap sales under no stretch of imagination can be termed as manufacturing activities. The learned CIT further observed that the bills issued by the assessee also clearly indicated the amount of sales and excise duty in respect of repaired transformers and at the end of the bill, labour charges had been shown, which clearly established that the assessee was not manufacturing but was simply selling the coils, material and transformer oils on which excise duty and labour were charged separately in the bills. Accordingly, the CIT con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact manufacture of new transformers. The technical specification provide that the petitioner is entitled to take tank and core only to its works, and the repair work shall involve opening of transformer cover, detanking core and coil assembly at PSEB premises for taking only tank and core to the work of the repairing firm, returning of all old HV/LV leg coils and all other parts except tank and core before taking the same to the works for repairs. Regarding replacement of parts, it was submitted that it would involve replacement/assembly of parts such as HV/LV limb, coils, bushings, gaskets, synthetic rubber washers for bushing assemblies breather, oil level gauge, oil drain and filter valve, covering bolts, plugs, top cover plates, caps, screws, transformer oil, etc., fitting, fixing and making connections complete in all respects. It was further clarified that the distribution transformers are manufactured by assembling of parts, i.e., steel fabricated body, lamination core, HT/LT aluminium copper wire/strips, coils, fabrication of angles and channels, brass fittings, bushings, insulation material, connecting wires/strips, ceramic insulation, painting of body (inside and outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1) B.S. Bajaj Sons vs. CIT (1996) 135 CTR (P H) 491 : (1996) 222 ITR 418 (P H) (2) CIT vs. Lucky Mineral (P) Ltd. (1996) 134 CTR (Raj) 541 : (1997) 226 ITR 245 (Raj) (3) Indian Poultry vs. CIT (1997) 138 CTR (MP) 382 : (1998) 230 ITR 909 (MP). 4. We have heard both the parties at length and also gone through the material available on the records along with various case laws cited by both the parties. It appears that the dispute relates to the manufacturing process and as per CIT, the job work, the repairing work of the transformers did not amount to the manufacture and accordingly the benefit under ss. 80HH and 80-I is not available to the assessee. The expression 'industrial undertaking' is not defined in the Act. It would, therefore, be open to look for the meaning of this expression by referring to its definition in sister legislation, and failing that to adopt a common parlance meaning. It is undisputed fact that the process involved in the manufacturing of the transformers and repairing of the transformers involved similar activities. Both the activities are performed by the assessee by using the similar type of machinery and manufacturing process is also simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than the actual conduct of the business. Sec. 80-I envisaged relief being granted in all cases where there was some direct nexus between the income and the priority industry. Since the manufacture of machinery by the assessee was a priority industry, the carrying out of repairs of machinery manufactured and sold by the assessee was an activity which had a direct nexus to the priority industry and the income derived therefrom must be held to be attributable to the priority industry. The income derived from interest paid by the buyers of machinery manufactured by the assessee on deferred payment also had a direct nexus to the assessee's priority industry and was attributable to it. The facility of after-sales repairs and of deferred payment were inducements offered to the intending purchasers and were intimately linked to the assessee's priority industry." Therefore, the assessee was entitled to deduction under s. 80-I in respect of such income." In the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT, the observations of the Hon'ble Supreme Court were as under: "The legislature has deliberately used the expression "attributable to", having a wider import than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting aside the order of the AO, dt. 15th March, 1996 and directing that the assessee was not entitled for any deduction under ss. 80HH and 80-I of the IT Act, 1961. So we set aside the order of the CIT and direct the AO to allow deduction under ss. 80HH and 80-I as per law which is available to the assessee because we have already held that the activity of job work was also the same as that of manufacturing the new transformers. 5. ITA No. 261/Asr/2000; Asst. yr. 1993-94 In the first ground of this appeal, the assessee contended that the learned CIT(A) erred in holding that the receipt from the repair of old transformers are not the part of the profits and gains derived from the industrial undertaking. 5.1 This issue we have already decided in ITA No. 203/Asr/1998 and directed the AO to consider the income from repair of old transformers as profits and gains derived from an industrial undertaking. Hence, this ground of appeal is allowed. 6. Ground No. 2 is also related to the receipts from the repair of old transformers. The directions given in aforesaid ground No. 1 should be followed for computing deduction under ss. 80HH and 80-I. 7. Ground No. 3 is general in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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