NATIONAL CONSTRUCTION CORPORATION Vs. INSPECTING ASSISTANT COMMISSIONER
INCOME TAX APPELLATE TRIBUNAL
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K.S. Viswanathan, Accountant Member -
(1.) THESE are two cross appeals from the findings of the Commissioner (Appeals) that the assessee, a registered firm, engaged in construction of buildings is eligible for deduction under Section 80J of the Income-tax Act, 1961 ('the Act').
(2.) The assessee is a firm constituted under a deed of partnership dated 24-4-1974. The partnership business is constructing buildings on a plot of land allotted to them by the Government of Maharashtra at Nariman Point. The building would consist of several shops, offices, basements and garages, which were sold to various persons on ownership basis.
In the assessment proceedings for the assessment year 1979-80, for which the accounting year was the year ended 30-6-1978, the assessee claimed that they were entitled to deduction under Section 80J. The ITO held that the assessee was not eligible for the deduction, while, on appeal the Commissioner (Appeals), following the decisions of the Bombay Tribunal Benches in some other cases held that the assessee was entitled to this deduction. However, he gave a finding that the industrial undertaking had started functioning in the accounting year relating to the assessment year 1975-76 and would be entitled to the deduction only up to 1979-80. While the department is aggrieved against the finding that the assessee is entitled to the deduction, the assessee is aggrieved against the finding of the Commissioner (Appeals) that the first year of such eligibility is the assessment year 1975-76.
(3.) WE will first of all address ourselves to the question whether the assessee is entitled to the deduction. Shri Ramani, learned counsel for the assessee, had placed reliance on the decision of the Bombay High Court in the case of CIT v. Pressure Piling Co. (India) (P.) Ltd.  126 ITR 333 (Bom.) and the case of CIT v. N.C. Budharaja & Co.  121 ITR 212 (Ori.). According to him, the Bombay High Court decision in the case of Pressure Piling (supra) is directly applicable on the point at issue since that was also a case of a construction company and the claim was regarding deduction under Section 80J. Reliance had been placed on the Orissa High Court decision to show that a construction activity is also an industrial activity. It has been submitted, on a factual plan, that in building construction work, the land is excavated at several places for laying the foundation on which the entire superstructure is erected. Wherever necessary, piles are laid for the foundation. The raising of columns, construction of walls, laying of roof, flooring, installation of sanitary system, laying of cables, fixing of doors and windows are the main requirements for the erection of a building. It was further submitted that at every stage some or other engineering process is involved and some kind of manufacture of one or the other article is produced. The components mainly used in the construction of buildings are cement, steel, sand, timber, etc. Several articles are processed or manufactured in the course of erection of a building. The finished product, which is distinct and different in shape from the raw materials used, cannot be anything but an article. Relying on the decision of the Orissa High Court, it is submitted that if a dam is an article, a building would certainly be considered as an article.;
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