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TMI Blog2006 (4) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... per the copy of the Minutes of the Meeting of COD held on 2-2-2006, filed by the assessee. The grounds of appeal raised are inter-connected. The facts are that the assessee-company is exclusively engaged in the business of providing housing finance. It was incorporated in the financial year 1989-90 and during the previous year relevant to the assessment year under appeal, the assessee came up with public issue of 189 lakhs equity shares of Rs. 10 each at a premium of Rs. 50 per share, aggregating to Rs. 113.50 crores. In connection with the aforesaid public issue, the assessee incurred total expenditure of Rs. 7,08,51,925. 1/10th of the above expenditure was claimed during the present assessment year under section 35D(ii) of the IT Act. It was claimed before the Assessing Officer that the deduction is allowable as the aforesaid expenditure was in connection with the extention of the assessee's industrial undertaking. The claim of the assessee rested on definition of 'industry' as per section 2(j) of the Industrial Disputes Act, 1947. It was claimed that under the aforesaid Act, 'industry' means any business, trade, undertaking, manufacture and includes any calling service, employm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... popular meaning. Section 54D of the IT Act, which grants an exemption must be construed liberally and the expression 'industrial undertaking' occurring in section 54D must be given its popular meaning. 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 be one which partakes of the character of a business. The word 'business' connotes some real, substantial and systematic or organized course of activity with a set purpose. The word 'business' is a word of wide import and in fiscal statutes must be construed in a broad rather than a restricted sense. The words 'industrial undertaking', therefore, should be understood to have been used in section 54D in a wide sense, taking in its fold any project or business a person may undertake. The Government acquired the land and building forming part of an ice factory belonging to the assessee. The ITO assessed the long-term capital gain arising fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sector. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations. If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking. Undertaking must suffer a contractual and associational shrinkage as explained in AIR 1953 SC 5S, so also, service, calling and the like. This yields the inference that all organized activity possession the triple elements above-mentioned, although not trade or business, may still be industry provided the nature of the activity, viz., the employer-employee basis, bears resemblance to what is found in trade or business. This takes into the fold of 'industry' undertaking, calling and services, adventures analogous to the carrying on of trade or business. All features, other than the methodology of carrying on the activity, viz., in organizing the co-operation between employer and employee, may be dissimilar. It does not matter, if on the employment terms there is analogy." 5. The ld. counsel for the assessee has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 'industrial undertaking' as contained in the Explanation to section 33B. The said Explanation is reproduced below: "In this section, 'industrial undertaking' means any 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 processing of goods or in mining." The ld. DRs also drew support from the definitions contained in various sections of Chapters VI-A, viz., sections 80HH, 80-I, 80-IA, 80J etc. Our attention is invited to the Supreme Court decision in the case of Indian Hotels Co. Ltd. v. ITO [2000] 245 ITR 538. In this case, it was held by the Supreme Court that the condition precedent for special deduction under section 80J is that the industrial undertaking must engage in the manufacturing or processing of an article. It is argued that a company which is purely a finance company cannot be said to be owning an industrial undertaking or an industrial unit. It is also contended that there is no case for extension of the industrial undertaking or setting up of a new unit as the public issue is meant for raising only additional capital. It is contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee is covered in the second category. It is significant to note that deduction in respect of first instalment of the expenditure is allowable in the year in which the extension of the industrial undertaking is completed or the new industrial unit commenced production or operation. Thus, it is unambiguously mentioned under section 35D itself that the new industrial unit must commence production or operation. In our view, the phraseology employed under section 35D implies that the industrial undertaking or the industrial unit must be engaged in some manufacturing, producing or processing activity. In our view, the cases relied upon by the ld. counsel for the assessee and distinguishable on facts. In the case of P. Alikunju, M.A. Nazeer Cashew Industries, the question pertained to deduction allowable under section 54D. In that case, the capital gain arising to the assessee was invested in construction of lodging house. It was held that running of lodging house can be said to be industrial undertaking within the meaning of section 54D. In the case of Peerless Consultancy Services (P.) Ltd. which is also relied upon by the ld. counsel for the assessee, the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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