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2.The first group of appeals is directed against the Judgment of a Division Bench of Orissa High Court answering the question referred to it under Section 256(2) in favour of the assessee. The question referred is to the following effect: "Whether on the facts found by the Appellate Tribunal, the assessee is entitled to the benefit provided under Section 80-HH of the Income Tax Act, 1961?" The assessment years concerned are 1974-75 and 1975-76. The respondent assessee is a firm of contractors constituted for the purpose of construction of a dam in Orissa. It was constituted under a partnership deed dated January 14, 1972. It was given the contract of constructing a dam in Dhenkanal District which is a notified backward district for the purpose of Section 80-HH. In proceedings for assessment of its income for the relevant years, the respondent claimed the relief under the said provision. The Income Tax Officer allowed the same. The Commissioner of Income Tax however revised the order of the ITO to the extent of grant of relief under Section 80-HH. He was of the opinion that the assessee, engaged in construction of a dam cannot be said to be engaged in manufacture or production of an article inasmuch as "a dam is constructed and not manufactured. It would be absurd to say that the assessee is manufacturing dam or the dam is capable of being sold. In short, the firm cannot be held as an industrial undertaking merely because it has to undertake certain manufacturing process in the course of construction of the irrigation project". He also referred to the fact that the assessee-firm was constituted only for the purpose of constructing a particular dam, on the completion of which work the firm would cease to exist automatically. The assessee preferred an appeal before the Income Tax Appellate Tribunal which was allowed on the following reasoning and findings:

8.The word "production" or "produce" when used in juxtaposition with the word "manufacture" takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products which emerge in the course of manufacture of goods. The next word to be considered is "articles", occurring in the said clause. What does it mean? The word is not defined in the Act or the Rules. It must, therefore, be understood in its normal connotation the sense in which it is understood in commercial world. It is equally well to keep in mind the context since a word takes its colour from the context. The word "articles" is preceded by words "it has begun or begins to manufacture or produce". Can we say that the word "articles" in the said clause comprehends and takes within its ambit a dam, a bridge, a building, a road, a canal and soon? We find it difficult to say so. Would any person who has constructed a dam say that he has manufactured an article or that he has produced an article? Obviously not. If a dam is an article, so would be a bridge, a road, an underground canal and a multi-storied building. To say that all of them fall within the meaning of word 'articles' is to over-strain the language beyond its normal and ordinary meaning. It is equally difficult to say that the process of constructing a dam is a process of manufacture or a process of production. It is true that a dam is composed of several articles; it is composed of stones, concrete, cement, steel and other manufactured articles like gates, sluices etc. But to say that the end product, the dam, is an article is to be unfaithful to the normal connotation of the word. A dam is constructed; it is not manufactured or produced. The expressions "manufacture" and "produce" are normally associated with moveables articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road or a building. The decisions of the Bombay High Court in CIT v. N. U. C. Pvt. Ltd. I and in CIT v. Shah Construction Co. Ltd.2 relied upon by Shri Murti are no doubt not decisions rendered under Section 80-HH or under Section 84 they arose under the relevant Finance Acts, the question being whether the assessees were industrial companies they do contain observations which tend to support the stand of the Revenue.

9.It may be that the petitioner is himself manufacturing some of the articles like gates, windows and doors which go into the construction of a dam but that makes little difference to the principle. The petitioner is not claiming the deduction provided by Section 80-HH on the value of the said manufactured articles but on the total value of the dam as such. In such a situation, it is immaterial whether the manufactured articles which go into the construction of a dam are manufactured by him or purchased by him from another person. We need not express any opinion on the question what would be the position, if the petitioner had claimed the benefit of Section 80-HH on the value of the articles manufactured or produced by him which articles have gone into/consumed in the construction of the dam.

19.It would be noticed that the language of Section 84(2)(iii), insofar as it is relevant, is identical with the relevant language in Section 80-HH. In the light of our discussion hereinbefore, can it be said that the assessee herein is engaged in manufacture or production of articles? We find it difficult to say so. According to the statement of case, the process adopted by the assessee, in short, is this: in the first instance holes are bored into earth at the site of construction with steel tubes; as the boring proceeds, these steel tubes are sunk into the ground; the soil is excavated through the tube itself; after reaching the correct depth, concrete is poured into the casings and compressed air is admitted; the air pressure forces the concrete down the casing and presses it into interstices; if necessary, steel re-enforcements are also provided to keep the rods in correct position. In this manner a strong foundation is laid. Upon that foundation further construction whether it is a building, bridge, dam or any other structure is raised. Can it be said that the said activity is one of manufacturing or producing articles? If the construction of a dam, a bridge or a building as a whole does not amount to manufacture or production of an article, it is difficult to see how the laying of foundation or foundations for such dam, bridge or building can be characterised as manufacturing or production of articles. The process of laying foundation is an integral part of the construction of a dam, bridge or building. Each such structure requires a foundation. The assessee does no more than lay the foundation(s) by a technologically innovative method, which lends to the strength of the foundation. It cannot be said that if a person constructs the entire dam including the foundation, he is not manufacturing or producing an article but where he merely lays the foundation for such dam he is manufacturing or producing an article. The piles, which the assessee lays by his particular method become a fixture in the earth. It ultimately becomes an integral part of the dam, bridge or building, as the case may be. It is not as if the assessee supplies prefabricated piles, which are bored into the earth by the contractor or owner, as the case may be. The work is done on the spot and it is a works-contract. It is no different from any other works contract which is done on the spot and becomes a part and parcel of a larger construction. In such matters one has to look to the precise activity and decide whether it can be said to amount to manufacturing or producing an article. For the above reasons and those given hereinbefore in Budharaja, these appeals are also liable to succeed.