Income Tax Appellate Tribunal - Allahabad
Shri Raj Kumar Singh And Co. vs Income-Tax Officer on 23 December, 1985
Equivalent citations: [1986]16ITD202(ALL)
ORDER
Shri Prakash Narain, Accountant Member
1. The only contention in this appeal is that the Commissioner (Appeals) had erred in holding that the assessee was not entitled to reliefs under Sections 32A, 80HH and 80J of the Income-tax Act, 1961 ('the Act').
2. The assessee is a firm. It entered into an agreement with Jaiprakash Associates (P.) Ltd. on 1-4-1979. As per the terms of this agreement, the assessee agreed to assist the above company for the quarrying, blasting, collection and carriage, stacking of boulders and metal at the mine roads required for the construction of mine roads at Kudremukh. Jaiprakash Associates (P.) Ltd. had undertaken a contract job from Kudremukh Iron Ore Co. Ltd. for the construction of mine roads at Kudremukh. The assessee was to undertake the above job with the help of the following machines :
1. Terex Loader 1 2. Tata Tippers 1 3. Excavators 3 4. Dozer D-9G 1 5. Drott TD-20 1 6. Stone Crusher 13. The assessee claimed reliefs Under Sections 32A, 80HH and 80J. The ITO was under the impression that the assessee was a contractor. He observed that the business of a contractor was not an industrial undertaking and that it was also not engaged in manufacture or production of any article or thing. He, therefore, denied the required reliefs to the assessee.
4. The assessee appealed to the Commissioner (Appeals). The Commissioner (Appeals) found that the assessee was itself not involved in any construction or manufacturing work, but its business was merely blasting, crushing and shaping boulders from the stones of the required size as per requirement of Jaiprakash Associates (P.) Ltd. He observed that it was Jaiprakash Associates (P.) Ltd., which was really doing the contract business, i.e., construction of tunnels, projects and roads, etc. He further observed that Jaiprakash Associates (P.) Ltd. had already been allowed the benefit of the above sections and, therefore, that benefit could not be granted to the assessee as it was doing only an ancillary job by supplying some ingredients required by the main contractors. He also observed that there was no quantitative difference between stones and a boulder and that only the shape was changed. He also referred to the decision of the Orissa High Court in CIT v. N.C. Budharaja and Co. [1980] 121 ITR 212, but observed that that, decision was not applicable to the case of the assessee.
5. The assessee is now in appeal before us. We have heard the parties. We are of the opinion that the assessee is entitled to the reliefs Under Sections 32A, 80HH and 80J. For claiming relief under all the above sections, it is necessary that the business of the assessee must amount to an industrial undertaking and that it should be engaged in construction, manufacture or production of any article or thing. This question is directly covered by the decision of the Madras High Court in CIT v. M.R. Gopal [1965] 58 ITR 598. It was held in this case that the process employed in converting boulders into small stones with the aid of mechinery is a manufacturing process and the undertaking is an 'industrial undertaking'. The Court had held that such an undertaking was entitled to the exemption Under Section 15C of the Indian Income-tax Act, 1922 corresponding to Section 80J of the 1961 Act. In view of the above direct authority, it is not necessary to refer to other decisions cited at the Bar.
6. The learned departmental representative, however, submitted that the assessee was not entitled to the relief under the above sections as its product was not the final product but only an intermediary one. Relying on the order of the Commissioner (Appeals), he submitted that Jaiprakash Associates (P.) Ltd. were themselves entitled to the reliefs under the above sections as they were manufacturing the final product in the shape of a dam or building and that the activity of the assessee was only to supply grit or stones, which were not the end in themselves, but were necessary for the manufacture or production of the final commodity. In this connection, he referred to the decision of the Bombay High Court in CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696. In this case, the assessee was engaged in the business of constructing dams, bridges, buildings and other works. It was claimed that the assessee was entitled to a rebate from super tax under the Finance Act, 1964, on the ground that it was engaged in the manufacture or processing of goods. The Tribunal found that though the assessee-company was required to carry out some processing activity, such as, mixing of certain materials to make concrete, converting of boulders into stones and so on, such processing activity was incidental or subsidiary to the main activity of construction. The Tribunal, thus, negatived the assessee's claim. The finding of the Tribunal was confirmed by the High Court.
7. We do not think that the above submission carries any weight. In the first place, it was pointed out by the learned counsel for the assessee that the latter was already in existence before Jaiprakash Associates (P.) Ltd. was constituted. He also submitted that the assessee had been carrying on the above business independently of the business of Jaiprakash Associates (P.) Ltd. In the second place, we also do not think that the above decision has any application to the facts of the assessee's case. In the cited decision, the question for consideration was whether the assessee-company was either wholly or mainly engaged in the manufacture or processing of goods. That question is not before us in the assessee's case. The assessee's case, on the other hand, is governed by the principle laid down by the Bombay High Court itself in the case of CIT v. Pressure Piling Co. (India) (P.) Ltd. [1980] 126 ITR 333. It was held in this case that the fact that the manufactured product was made for one specific use of one specific customer or for one specific site did not disqualify the product for being considered as a manufactured product. The grits or stones or boulders had complete independent existence, though ultimately they became part of the building. But that would not detract from the fact that before the superstructure was constructed, they were independent product as such. The assessee was, therefore, engaged in the manufacture or production of articles independent of the activity of Jaiprakash Associates (P.) Ltd. We, therefore, hold that the assessee is entitled to the reliefs under all the above three sections.
8. In the result, the appeal is allowed.