F.C. Rustagi, Judicial Member - (1.)SINCE identical disputes are raised in appeal Nos. 5928 & 2928/Del/87, which are also raised in third appeal being ITA No. 2385/Del/88, with other disputes, raises therein all these appeals were heard together and are being disposed of by this consolidated order, for the sake of convenience.
(2.)ITA No. 2703/Del/87 pertains to assessment year 1985-86, whereas ITA No. 5928/Del/87 pertains to assessment year 1984-85. For the sake of convenience we first take up these two appeals, because the main dispute in both these appeals is, whether the assessee-company, which is a private limited company, is an industrial company or not. The three aspects projected in the ground are, in case the company is industrial company, it has to be subjected to concessional rate of tax ; it is to be allowed relief Under Section 80-1; and benefit of investment allowance is also to be granted. Regarding the last ground, which pertains to levy of interest Under Sections 217 and 139(8), the learned counsel for the assessee, himself, was fair enough to say that the same is to be consequential. For the assessment year 1986-87, besides the dispute whether the company was the industrial company and dispute pertaining to interest, which action was admitted to be consequential by the learned counsel for the assessee, there are other disputes pertaining to valuation of closing stock ; sales promotion expenses ; and disallowance Under Section 43-B, with which we shall be dealing separately seriatum, after we adjudicate the issue whether the company is an industrial company.
The learned counsel for the assessee submitted that assessee assembles diesel engines, styled as Jackson for which different parts are purchased from different persons, which are number ten in all. He drew our attention to note claimed by the company for being considered as industrial undertaking. He submitted that assessee on one hand buys (i) engine ; (ii) alternators ; (Hi) engine instrument panels ; (iv) base plate ; (v) fuel tank ; (vi) control panels ; (vii) batteries ; (Viii) measuring instruments & gauges; (ix) radiators/silencers; and other components and converts them into several types of engines of different horse powers. He drew our attention to the said note and volumineous paper book, giving photographs of what actually the company manufactures. He placed reliance on large number of circulars from well known concerns, like Kirloskar ; NGEF ; Crompton Greaves ; Jyoti Ltd. ; Ashok Leyland etc., which are placed on assessee's compilation. He submitted that it is through manual labour that the said diesel engines are manufactured or assembled. He drew our attention to details of establishment expenses and details of salaries paid to staff. After dealing at length with factual aspects, he relied on catena of judgments, such as Ashok Motors Ltd. v. CIT [1961] 41 ITR 397 (Mad.), CIT v. Standard Motor Products of India Ltd. [1962] 46 ITR 814 (Mad.), CIT v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811 (Guj.), CIT v. Tata Locomotive & Engg. Co. Ltd. [1968] 68 ITR 325 (Bom.) and Addl. CIT v. A. Mukherjee & Co. (P.) Ltd. [1978] 113 ITR 718 (Cal.) and submitted that some of the cases arc absolutely identical and the CIT (Appeals) is wrong in distinguishing some of them from the instant case. The learned D.R. on the other hand besides relying on the orders of the two lower authorities submitted that assessee does not make any new engine. What is written on the engine is Jackson Engineers. He submitted that since it is only assembling of certain parts, purchased from different parties, the assessee cannot be treated as an industrial undertaking.

(3.)AFTER taking into consideration the rival submissions and going through the facts of the case carefully, we arc unable to uphold the finding of the CIT (Appeals) that the assessee is not an industrial undertaking. From the perusal of pictures given by the assessee in respect of diesel generating sets, assembled or manufactured by the assessee it is clear that the same are named as "Jackson". The said engines are required by large industrial houses for meeting their power requirements. May be that a part of the completed machine, at a place it is written Jackson Engineers, but the lobo which is placed mainly on the engine, is "Jackson" and the same are made in various kinds and ranges up to 1,000 KVA. There is no controversy about the fact that there are as many as ten components of the said machine. When we see the chart regarding manufactured products of the assessee, we find it gives details of very class and kinds of engines and alternators, procured and purchased by the assessee in the manufacture of diesel generating sets and all these engines have different capacities. The perusal of list of salaries and workers also shows that the assessee is using different components which may not be, technically speaking, raw material, but something between raw material and parts of engine, which are assembled and put together to make a diesel generating set. There is no controversy about the fact that the assessee-company purchases its alternators and engines separately from leading manufacturers, such as, Kirloskar, NGEF, Crompton Greaves, Jyoti Ltd. and Ashok Leyland etc. What the assessee assembles and manufactures through its assembling is not the same name which is assigned to the parts. The engine made by the assessee is known as diesel generating set. With this process in view and there being a separate name in the market for what the assessee makes, the assessee cannot be treated as non-industrial undertaking. When we peruse the order of the CIT (Appeals) and that of the ITO, we find that they are in error while distinguishing certain cases, relied upon by the assessee. Their Lordships of Bombay High Court in the case of Tata Locomotive & Engg. Co. Ltd. (supra), held that assembling of the imported parts into a finished chassis amounted to the manufacture or production of an article within the meaning of Section 15C(2)(ii) of the Income-tax Act, 1922. Their Lordships dealing with the wider and narrower connotation of the word "manufacture", held as under :
that in the present case the assembly stage was a part and parcel of the entire industrial undertaking of the assessee, whereby they manufactured or produced bus/truck chassis which were wholly indigenous. The assembly stage, upon the facts, was not a different industrial undertaking but one intimately connected with the subsequent stages, whereby the Indian bus/truck chassis were progressively manufactured.

4.1 It will not be out of place to mention that Their Lordships in the said case of Tata Locomotive & Engg. Co. Ltd. (supra), relied on i.e. the well known case of Ajay Printery (P.) Ltd. (supra). In the said case the Hon'ble Gujarat High Court went on to consider even the business of printing balance-sheets, profit and loss accounts, pamphlets, dividend warrants and share certificates etc. as manufacture of goods. Even Ashok Motors Ltd.'s case (supra) came to be considered by the Hon'ble Bombay High Court in case of Tata Locomotive & Engg. Co. Ltd. (supra). In Ashok Motors Ltd.'s case (supra), their Lordships of Madras High Court had occasion to deal with the issue, whether the assessee was an industrial undertaking and if the said case is gone through carefully, it indicates that assembling of cars by imported parts was industrial undertaking, though the main theme of the case was different.

4.2 Even Calcutta High Court in case of A. Mukherjee & Co. (P.) Ltd. (supra), went a step further to hold that the assessee, which was purchasing papers and hit upon a suitable format for the books, got it printed as per its requirements under its supervision and guidance and after the books were printed, they were got bounded after suitable change, the assessee was held to be a manufacturer and the undertaking as an industrial undertaking. On the basis of facts, available on record and by looking to the law from different High Courts, the assessee has got to be treated as industrial undertaking. We, therefore, reverse the finding of the CIT (Appeals) for all the three years and direct the ITO to accept assessee's contention, regarding levy of concessional tax and its claim Under Section 80-I and investment allowance. In course of discussion it was mentioned that though the assessee has mainly assembled diesel generating sets, some alternators were directly sold. In course of discussion the assessee's reply was that these were alternators which were utilised for assembling certain diesel generating sets at the place of the customers. Even this the ITO while giving effect toils order would see to it that assessee is an industrial undertaking; is entitled to concessional rate of tax and benefit of investment allowance and 80-I, but would be at liberty to see that the percentage of trade is in conformity as warranted by the statutes. About the ground pertaining to charge of interest we have already stated above that the learned counsel for the assessee has himself admitted that the same is to be consequential after appeal effect of this order is taken into account.

4.3 Before we part with the matter we shall be failing in our duty in case we do not point out that the CIT (Appeals) in its order pertaining to assessment year 1985-86 has mentioned that he has followed the earlier year's order, whereas in his order for assessment year 1984-85, it is mentioned by him that he has adjudicated the matter in appeal pertaining to assessment year 1985-86. We may mention here that appeal for assessment year 1985-86 came to be decided by the CIT (Appeals) on 2-4-1987, whereas appeal for assessment year 1984-85 was decided on 16-10-1987. Therefore in appeal for assessment year 1985-86 the order for assessment year 1984-85 could not be available to the CIT (Appeals).