ORDER
P.S. Dhillon, Judicial Member
1. The revenue has preferred this appeal, against the order dated 25-11-1985 of Shri J.S. Gill, AAC who allowed the appeal against the order dated 28-1-1985 of Shri S.K. Vasistha, ITO.
2. The relevant facts, in brief, are that the assessee is an ‘individual’. The assessment year involved is 1982-83, the previous year of which is ending 31-3-1982. The business of the assessee is printing and sale of cloth; as well as job work. Besides it, the assessee has income from salary, property and other sources.
3. The assessee filed the return of income and made claims, inter alia, for the investment allowance, which was disallowed by the ITO on the ground that the assessee is not manufacturing unit.
4. In appeal, the AAC allowed the claim of the assessee for the reasons mentioned in para No. 3 of his order.
5. The revenue being further aggrieved has preferred this appeal. Shri Suman, the learned departmental representative contends that on the facts and in the circumstances of the case, the learned AAC has erred in directing the ITO to allow investment allowance on the cost of the new machinery purchased by the assessee, disallowed by the ITO on the ground that unit of the assessee is not a manufacturing unit. He further contends that the investment allowance is to be allowed if the conditions laid down under Section 32A of the Income-tax Act, 1961 (‘the Act’) are fulfilled by the assessee, for which purpose the assessee has to prove that the assessee is an industrial undertaking or small scale industrial undertaking, which manufactures article or goods or thing. Reliance is placed on the decisions in the cases, Niemla Textile Finishing Mills (P.) Ltd. v. ITO [1985] 152 ITR 429 (Punj. & Har.), CWT v. P.T.N. Shenbagamoorthy [1983] 144 ITR 724 (Mad.), CWT v. K. Lakshmi [1983] 142 ITR 656 (Mad.) and on the decision of the Tribunal Madras Bench ‘C’, Madras, in the case Kanakadhara Industries v. Third ITO [1984] 7 ITD 142.
6. On the other hand, Shri Vinod Mahajan, the learned counsel for the assessee contends that the printing of the cloth is manufacturing of goods or article and, therefore, the assessee is entitled to investment allowance particular when the assessee is a small scale industrial undertaking. He further contends that the decision of the Hon’ble Punjab and Haryana High Court in the case of Niemla Textile Finishing Mills Ltd. {supra) is distinguishable.
7. We have heard the rival contentions and gone through the record before us. The investment allowance is to be allowed, if the assessee claims and proves it. For this purpose, the assessee is to claim that the assessee is an industrial undertaking or small scale industrial undertaking, which manufactures article or good. In this case, there is no finding of the ITO that the assessee is an industrial undertaking or small scale industrial undertaking, but he has held that the assessee is not a manufacturing unit. The assessee’s counsel contends that when the ITO has not held that the assessee is neither industrial undertaking nor small scale industrial undertaking, then this question cannot be raised at the level of the Tribunal and, therefore, the Tribunal is to take that the assessee is an industrial undertaking or small scale industrial undertaking. This contention of the assessee is without substance in view of the fact that it is for the assessee to satisfy the conditions laid down in Section 32A.(2)(b)(ii) and (iii) read with Explanation 2 says as under :
(2) The ship or aircraft or machinery or plant referred to in Sub-section (1) shall be the following, namely :-
(a) ** ** ** (b) any new machinery or plant installed after the 31st day of March, 1976,- (i) ** ** ** (ii) In a small scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (iii) in any other 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. Explanation * ** **
(2) an industrial undertaking shall be deemed to be a small scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed,-
(i) in a case where the previous year ends before the 1st day of August, 1980. ten lakh rupees ; and
(ii) in a case where the previous year ends after the 31st day of July, 1980, twenty lakh rupees ;
and for this purpose the value of any machinery or plant shall be,-
(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee ; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant,
8. Thus, from the provisions of Section 32A(2)(ii) and (iii), it is manifest that investment allowance can be claimed by the assessee, which is an industrial undertaking or small scale industrial undertaking, which manufactures or produces article or thing. Therefore, onus is upon the assessee to prove itself as an industrial undertaking or small scale industrial undertaking and, thereafter to prove that it manufactures or produces article or thing. In this case, the assessee has not shown and proved itself either an industrial undertaking or small scale industrial undertaking.
9. Assuming that it is not in dispute and the dispute is that the assessee is not a manufacturing unit, therefore, we have to decide that whether printing of cloth is manufacturing or producing an article or thing.
10. In the case of Niemla Textile Finishing Mills (P.) Ltd. (supra), their Lordships of the Hon’ble Punjab and Haryana High Courts held as under :
Held, that the mere process of dyeing, finishing, scouring and singeing of fabrics and textiles of all kinds only results in giving a good finish to a particular article manufactured or produced and making it a better marketable article, but these processes by themselves do not amount to ‘manufacture or production of textiles’ within the meaning of Entry 23 of Schedule I to the Industries (Development and Regulation) Act, 1951, and, hence, the assessee would not be entitled to the grant of tax credit certificate under Section 280 ZB of the Income-tax Act, 1961.(p. 421)
The learned departmental representative relies upon it and contends that the printing of cloth is not manufacturing or producing of an article or thing. On the other hand, the learned counsel for the assessee contends that this case is distinguishable. We do not see any force in this contention, in view of the fact that this case is there under the Act and is that of the Hon’ble Punjab and Haryana High Court the ratio of which is binding on the income-tax authorities and the Tribunal. Thus, it cannot be held on the ground that in the case decided by their Lordships of the Hon’ble Punjab and Haryana High Court (supra) the assessee was engaged in dyeing, scouring, singeing, milling and finishing of all types of woollen, silken or cotton fabrics, while in the case of the assessee it is printing of cloth, therefore, the case mentioned above is not applicable to the facts of this case.
11. In the case of Kanakadhara Industries (supra), the Tribunal held as under :
Since the assessee-firm was ginning cotton for its customers, there is no question of its manufacturing or producing the articles as required by Section 80J(4)(/v). For the purpose of this section, the assessee should be the owner of the machinery and plant, the owner of raw material used in the manufacture or production of articles, and should also deal in such articles. If any of these requirements is missing there is no manufacture or production as required by this provision.
The words ‘manufacture’ and ‘production’ are not synonymous to each other. ‘To manufacture’ is to bring into being a thing or article from raw material by mechanical process and it is synonymous with ‘to make’. But ‘production’ means that an article or thing comes into being by natural, biological, chemical or mechanical proceses. Thus, ‘manufacture’ and ‘production’ are different terms and creation of a thing or article is the result of different process or processes, or mixed process or processes. Further, ‘manufacture’ or ‘production’ of articles or goods is different from the ‘processing’ of articles or goods. In the latter case, the goods are there merely for refining, polishing, repairing and maintaining.
In ginning of cotton, there is no question of production of an article. It is also not manufacture but only a manufacturing process like retreading of tyres or generating, transforming or transmitting power. ‘Manufacture’ implies a change but every change in raw material is not manufacture. There must be such transformation that a new and different article must emerge having a distinctive name, character or use. In deciding whether there is manufacture of an article in cotton ginning, only decided cases under the Income-tax Act should be kept in mind. Unlike under the Income-tax Act, the sales tax law gives an extended meaning to the term ‘manufacture’ so as to include ‘manufacturing process’ of an article. Therefore, the meaning of the term ‘manufacture of an article’ in the Sales Tax Act cannot be applied for income-tax purposes. (p. 143)
12. Similarly, in the case of South Bihar Sugar Mills Ltd. v. Union of India AIR 1968 SC 922, their Lordships of the Hon’ble Supreme Court held that ‘manufacture’ implies a change, but every change in the raw material is not manufacture. There must be such transformation that a new and different article must emerge, having a distinctive name, character or use.
13. In the case of CST v. Dr. Sukh Deo AIR 1969 SC 499, their Lordships held that the word ‘manufacture’ in ordinary acceptation has a wide connotation, it means making of articles or material commercially different from the basic components by physical labour or mechanical process. Even in the case of State of Punjab v. Chandu Lal Kishori Lal AIR 1969 SC 1073, which is under the Sales Tax Act, 1958, on the issue of ginning cotton, their Lordships held that ginning cotton is process of manufacturing.
14. Thus, from the aforesaid finding, it is clear that printing of cloth is not manufacturing or producing an article or thing, rather it is processing of the coarse cloth to make it attractive more marketable. Accordingly, we hold that the assessee is not entitled to investment allowance under Section 32A. Hence, we set aside the order of the AAC on the issue and thereby restore that of the ITO.
15. In the result, the appeal is allowed.