M.A.A. Khan, J. - (1.) THE Income-tax Appellate Tribunal (Jaipur Bench) (hereinafter referred to as "the Appellate Tribunal") has, at the instance of the Revenue, referred to this court, under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), the following question of law for its opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that business activity of the assessee is clearly in the nature of manufacturing or production and, therefore, it is entitled for relief under Section 80HH of the Income-tax Act, 1961 ?"
(2.) THE facts stated by the Appellate Tribunal are these : " THE assessee had business of mining of limestones and marble blocks and thereafter cutting and sizing the same before being sold in the market. THE assessee claimed itself to be an industrial undertaking for the purpose of Section 80HH of the Income-tax Act. THE Income-tax Officer did not accept the same, as according to him, the assessee was not engaged in the manufacture or production of goods. THE Commissioner of. Income-tax (Appeals), however, accepted the claim of the assessee and allowed the appeal. THE Appellate Tribunal, on appeal by the Revenue, sustained the order of the Commissioner of Income-tax (Appeals) following an earlier decision of the Bench in the case of the assessee itself for the assessment year 1978-79 in I. T. As. Nos. 1492 and 1495 dated July 25, 1980." Mr. G.S. Bapna, learned counsel for the Department, urged that the assessee-company was engaged in the business of excavating the limestone and marble blocks and then selling the marble slabs after cutting them into marble slabs by sawing. It was submitted that the activities, being carried on by the assessee-company, do not involve any manufacturing process and, therefore, it was not entitled to deduction under Section 80HH of the Act. In support of his arguments, Mr. Bapna relied upon the decision of this court in the case of Polar Marmo Agglomerates Ltd. v. Union of India [1994] 73 ELT 536 (Raj) and the Supreme Court decision in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412. Mr. C.K. Garg, learned counsel for the assessee-company, on the other hand, submitted that the activities being carried on by the assessee-company involve conversion of boulders into marble slabs/tiles/rooks and such activities do amount to manufacturing activity within the meaning of the term used in Section 80HH. In this behalf, Mr. Garg heavily relied upon the decision of this court in the case of the assessee's sister concern, CIT v. Best Chem and Limestone Industries Pvt. Ltd. [1994] 210 ITR 883, in D.B.I.T. Reference No. 116 of 1981 decided on December 8, 1992. Reliance was also placed on the Madras High Court decision in the case of CIT v. M.R. Gopal [1965] 58 ITR 598, this court's decision in CTO v. Bikaner Gypsum Ltd. [1986] 61 STC 264, the Patna High Court's decision in CWT v. Jagdish Singh Sekhar [1987] 167 ITR 558, the Orissa High Court decision in CIT v. S.L. Agarwala and Co. [1992] 197 ITR 239 and the Supreme Court decision in Aditya Mitts Ltd. v. Union of India [1989] 73 STC 195 ; AIR 1988 SC 2237. We have carefully considered the facts of the case, as found by the Appellate Tribunal and thoughtfully gone through the cases cited by learned counsel for the parties before us. On the facts found by the Tribunal it is difficult for us to opine that the activities being carried on by the assessee-company involve any manufacturing process or activity. The relevant part of Section 80HH as it stood at the relevant time, runs as under : "80HH. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely : (i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970, but before the 1st day of April, 1990, in any backward area ; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area : Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in Section 33B, in the circumstances and within the period specified in that section ; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power."
(3.) IT is true that Section 80HH was brought on the statute book to encourage establishment of industrial undertakings in backward areas for the reason that such establishment leads to development of that area besides providing employment and, therefore, a liberal interpretation which advances the purpose and object underlying the provision may be adopted. But as was observed by the Supreme Court in CIT v. N.C. Budharaja's case [1993] 204 ITR 412, the said principle cannot, however, be carried to the extent of doing violence to the plain and simple language used in the enactment. IT would not be reasonable or permissible for the court to rewrite the section or substitute words of its own for the actual words employed by the Legislature in the name of giving effect to the supposed underlying object. After all the underlying object of any provision has to be gathered on a reasonable interpretation of the language employed by the Legislature. It is thus well-settled that while dealing with the articles used for business purposes a term is required to be interpreted in a purely commercial sense. It should not be interpreted in any technical sense. The meaning of the word "manufacture", in the context of the language of Section 80HH is, therefore, required to be construed in the popular sense in which it is commonly understood by the people. In the case of Deputy CST v. Pro Food Packers [1980] 46 STC 65, 65 ; [1980] Suppl. SCC 174, the Supreme Court considered the meaning of the word "manufacture" with reference to several decisions and stated the test in the following words : "There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." ;