COMMISSIONER OF INCOME TAX Vs. R C CONSTRUCTION

JUDGEMENT

(1.) IN this reference under S. 256(1) of the IT Act, 1961 (for short "the Act"), the Tribunal has referred the following question, at the instance of the Revenue, for opinion of this Court :

(2.) THE assessee is a firm registered under the Indian Partnership Act. The firm carried on business of converting big boulders into quartz and small chips with the help of plant and machinery particularly, the crusher. During the relevant asst. year 1983 -84, the assessee -firm claimed investment allowance for Rs. 45,358 under S. 32A of the Act on stone crusher claiming to be an industrial undertaking. But the AO under the provisions of ss. 32A(1) and 32A(2) of the Act held that the stone crusher would not come in the category of machinery or plant and also, it was further held by the AO that the firm was not an industrial undertaking, inasmuch as converting the big boulders of stone, into stone quartz or small chips could not be said to be production or manufacture of any article or thing. While coming to that finding, the AO relied on a decision of the apex Court in Union of India vs. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791 and in Mahabirprasad Birhiwala vs. State of West Bengal (1973) 31 STC 628 (Cal). Accordingly, the AO disallowed the claim of investment allowance of Rs. 45,358.

(3.) WE have heard Mr. U. Bhuyan, learned junior standing counsel appearing on behalf of the Revenue, and Mr. R.K. Joshi, learned counsel appearing on behalf of the assessee. Mr. Bhuyan has strenuously argued before us that the Tribunal under misconception of law gave an erroneous finding while holding that the crushing of stone boulders into stone chips with the help of a machine was in fact a manufacturing process and the business of the assessee was an industrial undertaking. According to Mr. Bhuyan, this finding is absolutely erroneous, and the allowance granted by the Tribunal under S. 32A for Rs. 45,358 was also erroneous. In this connection, Mr. Bhuyan has submitted that in order to get benefit of S. 32A(1) and (2) of the Act, there must be a manufacturing process as it is generally understood. He submits that making chips from big boulders cannot be said to be a manufacturing process, it only makes pieces of chips from the big boulders. In this connection, Mr. Bhuyan has drawn our attention to a decision of the apex Court in Union of India vs. Delhi Cloth & General Mills Co. Ltd. (supra). Relying on the said decision Mr. Bhuyan submits that as per the said decision making small chips out of big boulders cannot be said to be a manufacturing process, nor can it be said that the assessee was producing something in order to get the benefit under S. 32A. We have gone through the decision. In para. 14 of the said decision, the apex Court after considering the submission and the argument advanced observed that the word "manufacture" used as a verb is generally understood to mean bringing into existence a "new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. The distinction is well brought out in passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus :