ORDER
T.N.C. Rangarajan, Judicial Member
1. This appeal by the Revenue for the assessment year 1981-82 is mainly directed against the grant of investment allowance and relief under Section 80J. The appeal has come up before the Special Bench because of the difference of opinion between two Benches of the Tribunal on the question whether the assessee engaged in bleaching, calendering, dyeing and printing of cloth could be considered an ‘industrial undertaking’ for the purpose of Sections 32A and 80J of the Income-tax Act, 1961.
2. Theassessee is a registered firm. The business of the assessee was to purchase unbleached grey cloth and after bleaching it, subject it to the process of calendering, dyeing and printing so as to produce the finished product which was printed cloth. For the assessment year 1981-82, corresponding to the previous year ended 31-3-1981, the assesses filed a return on 30-11-1981 showing a loss of Rs. 10,95,090 and later a revised return 8-2-1982 showing loss of Rs. 11,83,000. The Income-tax Officer made a draft assessment proposing a variation exceeding Rs. 1,00,000 and forwarded it to the Inspecting Assistant Commissioner of Income-tax under Section 144B. The Inspecting Assistant Commissioner considered the claim of the assessee for deduction under Sections 32A and 80J. He noted that the objection of the Income-tax Officer for relief under Section 80J was that the assessee had not filed the particulars required in Form No. 10D along with the return of income. But he also noted that for the earlier assessment years 1978-79 to 1980-81, the appellate authorities had granted such relief. However, he was of the view that since the appellate order had not been accepted by the department, the relief claimed should not be given. The Income-tax Officer, therefore, made the assessment order on 31 -8-1984 disallowing the claim for deduction under Sections 32A and 80J, as directed by the Inspecting Assistant Commissioner. He determined the total income at loss of Rs. 9,92,420 and declared as not assessable.
3. On appeal, the Commissioner of Income-tax (Appeals) found that for the assessment years 1979-80 to 1980-81 the Appellate Tribunal had granted deductions under Sections 32A and 80J recognising the assessee as being engaged in the business of manufacture of articles. He, therefore, directed the Income-tax Officer to grant the deductions for this assessment year also.
4. The Revenue has appealed to contend that the processes carried on by the assessee did not amount to manufacture or production of any article so as to make the assessee eligible for the deductions under Sections 32A and 80J. It was pointed out on behalf of the Revenue that a Bench of this Tribunal by order dated 23-3-1987 in the case of United Bleachers Ltd. [IT Appeal Nos. 2948 (Mad.) of 1984 and 1799 (Mad.) of 1985] for the assessment years 1981-82 and 1980-81 had distinguished the decision of the Supreme Court in the case of Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 and had followed the decision of the Madras High Court in the cases of CIT v. S. S. M. Sizing Centre [1985] 155 ITR 782/20 Taxman 248 (Mad.), CIT v. S. S. M. Finishing Centre [1985] 155 ITR 791 and CIT v. Veena Textiles (P.) Ltd. [1985] 155 ITR 794 to hold that operations carried on like warping, sizing, bleaching, dyeing etc., did not result in manufacture or production of any article. Reliance was also placed on the decision of the Punjab & Haryana High Court in the case of Niemla Textile Finishing Mills (P.) Ltd. v. ITO [1985] 152 ITR 429 (FB).
5. On the other hand, it was contended on behalf of the assessee that the decisions, cited by the Revenue, should not be followed inasmuch as in the assessee’s own case, it has been recognised as eligible for the relief for the earlier years by the order of the Tribunal in IT Appeal Nos. 260 and 261 of 1984 dated 24-11-1984 for the assessment years 1979-80 and 1980-81.
6. It was further submitted that the decision of the Tribunal relied on by the Revenue had proceeded on two erroneous assumptions. According to the assessee, the first assumption was that the three decisions of the Madras High Court concluded the issue whereas, in fact, they dealt with a provision of the statute, which was quite different from the Sections under consideration. It was pointed out that the Madras High Court in those cases was concerned with Section 33(1)(b) which referred to the manufacture of any article listed in the Fifth Schedule and the question that arose was whether the bleaching, dyeing and printing of cloth would amount to manufacture of “textiles” which was the item in the Schedule. The Madras High Court held that the assessee in that case having purchased unbleached grey cloth, which had been already manufactured as ‘textiles’, the further processing of bleaching, dyeing and printing could not be regarded as manufacturing of ‘textiles’. In contrast, it was pointed out that the present provision with which we are concerned is Section 23A(2)(b)(iii), which refers to an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule, which is of very wide import and not limited to production of textiles.
7. According to the assessee, the second assumption in the order of the Tribunal was that the decision of the Supreme Court in the case of Empire Industries Ltd. (supra) was concerned with a special definition in the Central Excise Act which could not be applied to the provisions of the Income-tax Act. It was pointed out that the question actually arose in the case of New Shakti Dye Works (P.) Ltd. 1983 ELT 1736 (Bom.), where it was noted that the Central Excise Act had been amended in 1979 to include in the definition of ‘manufacture’ the bleaching, dyeing, printing, etc., processes in relation to the goods comprised in item No. 22(1), which was actually cotton fabrics so as to impose a separate ad valorem duty thereon. However, the court considered the question whether even without the amendment, bleaching, dyeing and printing processes were manufacturing processes on first principles and held that it must be accepted as ‘manufacture’ inasmuch as a new or different article having a distinct name and character had been produced by the transformation process. It was further pointed out that the Supreme Court in the case of Empire Industries Ltd. (supra) specifically approved this decision of the Bombay High Court and hence the decision of the Supreme Court cannot be distinguished as relating to a definition different from that in the Income-tax Act when the question was decided on first principles and there is no definition of ‘manufacture’ in the Income-tax Act. It was submitted that in the circumstances the assessee should be granted these deductions as in the earlier year.
8. On a consideration of the rival submissions, we are of the opinion that the assessee is eligible for the deductions under Sections 32A and 80J as in the earlier year. Firstly, we find no difference on facts between the earlier year and this assessment year so as to deny the deductions granted for the earlier year. That being the position, we arc normally bound to follow the order of the Tribunal for the earlier year in the assessee’s own case. [See CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad.)].
9. Secondly, we arc of the view that the question whether the assessee’s business of bleaching, dyeing and printing of unbleached grey cloth resulted in the manufacture or production of an article is concluded by the decision of the Supreme Court in the case of Empire Industries Ltd. (supra). The Supreme Court observed even with reference to the amendment in the Central Excise Act that “processes of the type which have been incorporated by the impugned Act were not so alien or foreign to the concept of ‘manufacture’ that these could not come within that concept”. The Supreme Court stated-
We are in respectful agreement with the conclusions as well as the reasoning of the decision of the Bombay High Court. (New Shakti Dye Works Pvt. Ltd.)
Thus the Supreme Court has clearly approved the decision of the Bombay High Court on first principles that the processes of bleaching, dyeing and printing amounted to manufacture of an article and since the expression “manufacture or production of an article” has not been defined in the Income-tax Act, we have to adopt the acceptation of that expression.
10. Again in the case of Ujagar Prints v. Union of India [1989] 179 ITR 317 at 321 the Supreme Court has reiterated :
The processes of bleaching, dyeing, printing, sizing, shrink-proofing, rubberising and organdie processing carried on in respect of cotton or man-made grey fabric amount to “manufacture” for the purpose and within the meaning of Section 2(i) of the Central Excises and Salt Act, 1944, even prior to the amendment of the Section by Section 2 of the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980. The view expressed in Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC) that such processes were not so alien or foreign to the concept of ‘manufacture’ that they could not come within that concept is correct.
This was on a reference made by a Bench of two Judges of the Supreme Court itself in Ujagar Prints v. Union of India [1987] 167 ITR 904 at 908 to a larger Bench of five Judges.
11. We also note that Section 80J also refers only to industrial undertaking which manufactures or produces articles and, therefore, attracts the same acceptation. Thus the Gujarat High Court in the case of CIT v. J.B. Kharwar & Sons [1987] 163 ITR 394 following the decision of the Supreme Court in the case of Empire Industries Ltd. (supra) held that relief Under Section 80J is available to an industrial undertaking engaged in bleaching, dyeing and printing of cloth.
12. The Revenue had placed considerable reliance on the three decisions of the Madras High Court in 155 ITR, which had been pressed into service on behalf of the Revenue in the case of United Bleachers Ltd. (supra). The order of the Tribunal in that case is dated 27-3-1987 and, therefore, the Bench did not have the benefit of the decision of the five Judges Bench of the Supreme Court in the case of Ujagar Prints (supra), which was delivered on 4-11-1988. In view of this latest pronouncement of the Supreme Court, there is no scope for any reservation regarding the ratio of the decision in the case of Empire Industries Ltd. (supra) as to what constitutes “manufacture”. In view of this, the aforesaid contentions of the Revenue have now become academic and we, therefore, do not dwell on it. In the circumstances, we are satisfied that the processes carried on by the assessee constituted the business of manufacture or production of an article and, therefore, the assessee was entitled to the deductions under Sections 32A and 80J.
13. The other objection of the Revenue for the grant of these deductions was that the particulars in Form No. 10-D had not been filed along with the return. The Appellate Tribunal has held in the assessee’s own case for the earlier year, in the order cited above, that the furnishing of Form 10-D is academic where there is no income in respect of which the deduction could be set off in the assessment year. We find that for this assessment year also the Income-tax Officer has determined a loss and hence the failure to furnish the particulars in Form No. 10-D would be irrelevant in determining and carrying forward the deduction under Sections 32A and 80J.
14. In view of our aforesaid discussion, we consider that the decision in this very case taken in ITA Nos. 260 & 261/Mds/84 for the assessment years 1979-80 and 1980-81 which is in conformity with the law laid down by the Supreme Court in Ujagar Prints (supra), has necessarily to be followed, even after denovo consideration on merits, in preference to the decision of the Tribunal in the case of United Bleachers Ltd. (supra).
15. There is another ground of appeal relating to the addition of Rs. 46,643 made towards unexplained investment. The Assistant Commissioner in his directions Under Section 144B noted that the assessee had constructed an embroidery unit at a cost of Rs. 6,51,357 but the Departmental Valuation Officer had estimated the cost of construction at Rs. 6,98,000 so that the difference of Rs. 46,643 was added as the income of the assessee from undisclosed sources. The assessee also claimed that if supervision charges at 10% is taken into account instead of 7% estimated by the Departmental Valuer, the cost shown by the assessee would be acceptable. The Commissioner (Appeals) found that there being no defects in the accounts maintained, no addition was called for. The Revenue has not established that the assessee had spent anything more than what was recorded in the books for the construction of the unit nor is there any material on record which is even suggestive of such extra expenditure having been incurred. In the circumstances, an addition cannot be sustained where the difference in estimates is less than 10% which is well within the margin of tolerance as far as estimates go. The order of the Commissioner (Appeals) deleting this addition is, therefore, correct and must be confirmed.
16. The Revenue has taken another ground as follows :-
The learned CIT (Appeals) failed to note that the assessee has not produced evidence to substantiate its claim that addition to electrical installations amounting to Rs. 58,060 is clearly the electrical wiring to the new building. The assessee’s valuer has given the cost of electrical installations at a lump sum figure of Rs. 12,000 only.
But we find from a perusal of the orders of the authorities below that though the Inspecting Assistant Commissioner mentioned, “Hence unless the assessee produces evidence to show that the addition to electrical installations amounting to Rs. 58,060 is clearly the electrical wiring to the new building, it is not possible to accept the plea of the assessee”. The addition actually made was only Rs. 46,643 and no other addition was made in this regard. Hence this ground of appeal is infrucluous.
17. In the result, appeal is dismissed.