JUDGMENT
V.V. Kamat, J.
1. This petitioner has a grievance against rejection of the reference application by the order dated November 8, 1994, of the Income-tax Appellate Tribunal (exhibit P-9). The petitioner wants a direction for reference as regards the following four questions :
” (i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is not entitled to the benefit of Sections 80J and 80HH of the Income-tax Act, 1961, in respect of the profit referable to the articles, products or things manufactured by it in the course of its construction ?
(ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal’s refusal to afford an opportunity to the assessee to produce the details called for by it for the first time at the hearing on December 7, 1993, amounts to a violation of the principles of natural justice which vitiates the appellate order ?
(iii) Whether, on the facts and circumstances of the case, having considered the entitlement of the assessee to the benefits under Sections 80J and 80HH of the Income-tax Act, 1961, in respect of the profits referable to the articles, products or things manufactured by the assessees in the course of its construction activities, which issue was left open by the Supreme Court in CIT v. N. C. budharaja and Co. [1993] 204 ITR 412, the Appellate Tribunal was justified in requiring the assessee to immediately produce the details of such profits especially when the Assessing Officer himself had not applied his mind to this aspect and for which reason the Appellate Tribunal had in the appellate orders of the assessee’s 1983-84 and 1985-86 assessments remanded the case back to the Assessing Officer to quantify the eligible deduction under Sections 80J and 80HH of such profits ?
(iv) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in finding, after having held in the appellate orders for the assessment years 1983-84 and 1985-86 following the decision in R. M. Enterprises v. First ITO [1993] 199 ITR 40 (AT) (Bom), that the assessee is not (sic) entitled to the benefits under Sections 80J and 80HH of the Income-tax Act, 1961, in respect of the profits referable to articles manufactured in the course of its construction activities, that a similar claim for the year is only an argument developed in view of the observations of the Supreme Court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 ?”
2. The assessee is a company incorporated as per the Companies Act, 1956, and is engaged in the business as engineers, contractors, consultants, etc. The year in question is 1984-85 in regard to which, particularly an item with reference to Sections 32A, 80J and 80HH of the Income-tax Act, 1961 (sic).
3. The present proceedings of the petitioner relate to the deduction under Sections 80J and 80HH of the Act. A reading of the two statutory; provisions would show manifold points of similarities which are conditions required to be complied with to enable the assessee to claim deduction thereunder. There are certain special aspects of differences in the two provisions. Whereas Section 80HH relates to newly established industrial undertakings (in the context of the present proceedings) in the backward areas, Section 80J covers other areas not covered by the earlier provision. Obviously, as a result of this difference in the situation, the requirements show difference with regard to the percentages of deduction, period for which the deductions can be claimed and other aspects which can be understood as necessary differences arising out of legislative consider-ations dealing with different situations, although the requirement of following certain conditions shows an element of similarity in regard thereto. These general conditions are required to be fulfilled and it is only on and after satisfaction thereof, there can be a thought of consideration of deduction thereunder. The conditions are available in Section 80HH (sub-section (2)) and Section 80J (sub-section (4)) of the Act. The first requirement is that the concerned industrial undertaking is not formed by the splitting up or the reconstruction of the business already in existence. The second condition is that it is not formed by a transfer to a new business of machinery or plant previously used for any purpose whatsoever. The third condition relates to the commencement of production and that is with reference to Section 80] of the Act as well as Section 80HH. It states that the commencement of manufacture or production of articles before the specified date as specified independently in the section requires satisfaction with reference to any particular industrial undertaking. The fourth condition is the requirement of employees with reference to the industrial undertaking and in regard to this specific number of employees find mention in the two provisions.
4. Therefore, the assessee invoking the provisions of Sections 80J and 80HH of the Act has to satisfy compliance of the conditions generally specified hereinbefore.
5. It appears that by the assessment order dated March 24, 1987 (exhibit P-1), the claim for deduction as specified hereinbefore was rejected and the reasoning appears to be that it was because the claim was rejected in the prior assessments based on the same arguments.
6. Further travel of the proceedings for the year in question 1984-85 granted a partial relief to the assessee to the extent of Section 32A of the Act. The appellate authority in regard to the claims based on Sections 80J and 80HH followed the same reasoning that the rejection of the claim for the earlier years would be the rule of the situation. This was by the order dated October 16, 1987 (exhibit P-2).
7. There is a step in the narrative disturbing the link. It appears that with regard to the assessment years 1983-84 and 1985-86, the proceedings were before the Income-tax Appellate Tribunal and by the orders dated June 4, 1993, and August 27, 1993, respectively, the Appellate Tribunal followed the decision of the Income-tax Appellate Tribunal, Special Bench (R. M. Enterprises v. First ITO [1993] 199 ITR (A.T.) 40 (Bom)), and held that the assessee with regard to those years would be entitled to get deduction with regard to the claim under Sections 80-I and 80HH. This was in respect of the profits, referable to manufacture of any article, product or thing in the course of its construction activity.
8. The narration takes us further to the decision of the apex court dated September 7, 1993 (GIT v. N. C. Budharaja and Co. [1995] 204 ITR 412), where the question of claim for deduction of the assessees who were contractors came up for consideration in the matter of construction of a dam and with reference to the work in the process undertaken by the concerned assessees whether could be considered as constituting an industrial undertaking and in connection whether the benefit of the provisions could be made available to them to claim deductions. The apex court ruled that the test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in trade as a new and distinct commodity. In the process of discussion the reasoning proceeds further that the expressions “manufacture” and “production” are normally associated with movables-articles and goods, big and small-but they are never employed to denote construction activity of the nature involved in the construction of a dam or a building. In the sense the word “article” must be understood in its normal connotation the sense in which it is understood in the commercial world and, therefore, it is well to keep in mind the context since a word takes its colour from its context and, therefore, it cannot comprehend or take within its ambit a dam, a bridge, a building, a road, a canal and so on. The apex court has made it clear in the course of the judgment that the question as to whether the work undertaken could be characterised as an industrial undertaking was not being considered as “no arguments were advanced for the Revenue questioning the view taken by the High Court”. With regard to the role of the contractor in the context of the expressions “manufacture” and “produce”, after a resume of decided cases in regard thereto it is observed that manufacture is the end result of one or more processes through which the original commodity is made to pass and it is only when the change or a series of changes take the commodity to a 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.
9. Similarly, the apex court considered the words “production” or “produce” and observed that in the process the by-products, intermediate products and residual products show their emergence.
10. It is in this process of reasoning, the apex court has observed a hypothetical situation that it may be that the respondent himself is manufacturing some of the articles like gates, windows, doors which go into the construction of a dam but that makes little difference to the principle, because the petitioner is not claiming the deduction provided on the value of the said manufactured articles, on the total value of the dam as such making it immaterial and irrelevant to find out whether such articles are manufactured by him alone or are purchased by him from some other person. Naturally the apex court has observed that it was not called upon to express any opinion on the question, The petitioner-assessee felt and accordingly has averred in the petition that the apex court left the question for claim of a deduction in respect of profits referable to articles or things manufactured in the course of construction of dams, bridges, roads and canals, etc.
11. It is already seen that the apex court was not required to consider this hair splitting situation.
12. The proceedings for the assessment year in question (1984-85) came
up before the Tribunal and by the order, the Tribunal also considered the
situation. Each assessment year is a separate unit and there is no continu
ation for review or reopening, also there is a statutory period of limitation
under Section 254(2) of the Act. It is submitted by the petitioner in the
petition by averment that as the Tribunal with regard to the assessment
years 1983-84 and 1985-86 had held that the applicant was so entitled, the
said decision ought to have been followed. It is also submitted that the
Appellate Tribunal ought to have remanded the matter to find out the
quantum of entitlement which was not done by the Assessing Officer but
had disallowed the claim by his order. The said order is at exhibit P-5.
The Tribunal has taken the view in the light of the above decision of the
apex court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412, that the
assessee is not entitled to the claim for benefit available under the statutory
provisions of Sections 80J and 80HH of the Act.
13. It was before the Appellate Tribunal that it was tried to be argued effectively and with force on the basis of the observations of the apex court (referred to as found at page 424 of the said decision) with regard to the prayer for remand. The Appellate Tribunal has given its reasons in the following manner :
” The Bench wanted to know the list of articles or things manufactured by the assessee and the cost of such articles, if any. The Bench further wanted to know whether at least the contracts under which the work was undertaken by the assessee was on the basis of ‘cost plus’, and if so the cost of such articles and the profit relatable thereto, The learned advocate was unable to furnish the details but pleaded for an adjournment. This case has seen several adjournments, first on January 18, 1993, second on March 31, 1993, third on September 9, 1993, and we are not inclined to grant any further adjournments.”
14. It would thus be seen that the Tribunal, as bound, has followed the law declared by the Supreme Court, in accordance with the spirit of Article 141 of the Constitution of India.
15. We have already stated that the application for reference has been rejected, accepting the contention of the Revenue that the decision of the apex court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 would rule the situation.
16. An earlier judgment dictated by my brother (Mohammed J.) before the recess in Original Petition No. 397 of 1996 (Bhagheeratha Engineering Ltd. v. CIT [1997] 227 ITR 504 (Ker) (infra)) having examined the situation we have already held that the decision of the apex court rules the situation in regard to the claim for deduction under Sections 80J and 80HH of the Income-tax Act, 1961.
17. Learned counsel for the assessee strenuously submits that the anomalous situation has always to be avoided by the court. He pointed out that with regard to the assessment year 1983-84 reference has been called for and, therefore, the said course should be followed by us. Learned counsel also submitted that the Appellate Tribunal did not grant opportunity to the assessee to place the material on record in the light of the observations of the apex court in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412, relating to the aspect of deduction with regard to manufacturing some of the Articles like gates, windows, doors which go to the construction and to place material in regard thereto.
18. In the first instance, after carefully going through all the orders we do not find even a semblance of a pleading with regard to the contention”; of such a nature. We also do not find the necessary factual matrix which is really required to enable the assessee to claim the benefit of Sections 80J and 80HH of the Act. In order to satisfy ourselves we also showed our anxiety to see the material because ultimately the question is as to whether the assessee is entitled to claim deduction under the statutory provisions of Sections 80J and 80HH of the Act, finding no trace in regard thereto but consider whether the assessee can have any benefit of the observations of the apex court. When this petition was taken up for hearing on July 23, 1996, with anxiety we asked counsel with regard to the material in the context. When the petition was taken up today learned counsel on going through the material in his possession submitted that the material would only relate to the ground dealt with by the three authorities and would not be one to satisfy us to feel that there is a prima facie case with regard to the statutory conditions of Sections 80J and 80HH specified hereinbefore. Learned counsel submitted that it was only on one aspect the claim is rejected. Learned counsel for the purpose of submission meant thereby that it should be presumed that the authority was satisfied with regard to all other aspects which is the course of travel “of the present proceedings and generally the tax proceedings.
19. It must be stated that when we are required to consider the submission of denial of opportunity and a dent to the principles of natural justice, remand also requires its prior satisfaction that such order of remand would assure justice not in a vacuum but in an effective manner. Even if we peruse the questions there is no doubt that the assessee has to satisfy the statutory requirements of Sections 80J and 80HH. In addition thereto we have also to give expected weight to the observations of the Tribunal that the proceedings before it were adjourned several times making it helpless to observe that it could not be inclined to grant further adjournments. The Tribunal also has observed that only an argument is developed in the course of passing observations of the apex court without any material before us.
20. We also record our own assessment of the situation. The assessee in the travel of the proceedings has proceeded on erroneous presumption. From the situation that the Income-tax Officer rejected the claim and in support thereof recorded a reason, a situation leading to the presumption that the officer has accepted that other conditions or conditions of the statutory requirement are satisfied. There is no factual matrix required for consideration of the claim and learned counsel, in answer to a pointed query as to whether there is any material laid before the Income-tax Officer prior to the order passed by him showing satisfaction of the statutory requirements, expressed inability in the direction. This means that this was not pleaded. It also means that no material is placed before the Income-tax Officer with regard to individual items so that there can be an effective consideration in the light of the observations of the apex court referred to above. All these make the position more than clear that the observations of the apex court are sought to be taken as the last straw on the camel’s back, nay, if yet a second innings of the proceedings on the basis of thoughts that did not occur to anyone hitherto but for the judgment of the apex court. In our judgment, this is a violation to the eternal principle of finality of orders in the context. For all the above reasons, we find that there are no referable questions and the petition stands dismissed as a consequence.
21. A copy of the judgment under the seal of this court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders.