Sujata Manohar, J.
1. The assessees in this reference are Shah Construction Co. Ltd., Bombay. The reference relates to assessment year 1964-65. The assessee-company is engaged in the business of constructing dams, bridges, buildings and other construction work. It is an engineering company and it work is mainly done with the extensive aid of machinery.
2. The assessee had a flat in a building known as 'Khetan Estate' in Bombay. On or about 29th May 1943, the State of Bombay granted a lease in respect of an open plot of land, on which Khetan Estate stands now, in favour of Kanji Property Ltd. for the construction of a building. Kanji Property Ltd. assigned this lease in favour of one Khetan on 6th November, 1950. Khetan in turned formed a company called 'Khetan Estate Ltd.' The said company completed construction of the building on the said plot of land by the 19th September, 1952. The assessee-company is one of the shareholders of Khetan Estate Ltd., and a flat in the said building has been allotted to the assessee as such shareholder. The shareholders are required to pay a monthly rent to the company for the flat allotted to them. They also pay municipal and other taxes levied in respect of the flat. In respect of the flat so held by the assessee-company the Tribunal, confirming the finding of the ACC, held that the assessee was the owner of the flat and it was using the flat for the purpose of its business. It allowed the municipal taxes and depreciation in respect of the flat and deleted the addition, which the ITO had made, of the gross annual value as income from other sources.
3. The assessee-company had also claimed a rebate from super-tax under the provisions of the Finance Act, 1964, First Schedule, Pt. II, Para. D, on the ground that it was wholly or mainly engaged in the manufacture or processing goods. The Tribunal disallowed such a rebate, holding that the business the assessee-company cannot be considered as either wholly or mainly manufacture or processing goods. From these findings of the Tribunal, at the instance of the Commissioner, two questions have been referred to us for our opinion. At the instance of the assessee a third question has been referred to us for our opinion. The questions which have been so referred to us are as follows :
By the Commissioner
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee was the real owner of the flat in question ?
'(2) Whether, on the facts and in circumstances of the case, the Tribunal erred in holding that no income could be said to accrue to the assessee from the aforesaid flat ?'
By the assessee
'(3) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee was not wholly or mainly engaged in the manufacture or processing of goods ?'
4. Mr. Joshi, learned counsel for the Commissioner, has very fairly stated that questions Nos. 1 and 2, which have been raised at the instance of the Commissioner, are covered by a decision of this court in the case of CIT v. Mahendra J. Shah : 118ITR902(Bom) . In view of this decision, both these questions will have to be decided in favour of the assessee and against the Commissioner.
5. In view of this submission of Mr. Joshi, we need not examine questions Nos. 1 and 2 any further.
6. The third question that requires consideration is whether the assessee can be considered as wholly or mainly engaged in manufacture to processing of goods. The Finance Act, 1964 in the First Schedule, Pt. II, lays down the rate for super-tax and surcharge on super-tax. Under Para D. of Pt. II of the First Schedule, in the case of every company, other than the Life Insurance Corporation of India, super-tax at the rate of 55 per cent, has been levied on the whole of the income of a company. There are various provisos to Para D. Under cl. (iii)(A), 'in the case of a company which is wholly or mainly engaged in the manufacture or processing of goods or in mining in the generation or distribution of electricity or any other form of power and whose total income does not exceed rupees five lakhs, a rebate at the rate of 30 per cent. on so much of its total income as does not exceed rupees two lakhs and a rebate at the rate of 20 per cent. on the balance of the total income, ...... etc.' is allowed. According to Mr. Trivedi, learned counsel for the assessee-company, the business of the assessee-company is of constructing dams, bridges, buildings and other construction work. He submits that construction activity necessarily involves manufacture and processing of goods in large quantity and, therefore, the assessee-company should have been entitled to a rebate on the basis that it was a company which was wholly or mainly engaged in the manufacture or processing of goods. He drew our attention to a decision of our court in the case CIT v. Pressure Piling Co. (India) P. Ltd. : 126ITR333(Bom) . In the case the court was required to consider whether piles which were manufactured by the assessee-company by a special process and which were used in the foundation work of buildings could be considered as articles manufactured by the assessee-company. The court held that it was not necessary that articles which were manufactured should necessarily have the quality or the possibility of being sold and purchased across the counter nor was it necessary that they should be transportable to another site. A manufacturer specialising in the production of a particular product may produce and supply the article at the site itself. It held that the piles which were manufactured by the assessee-company at site for the foundation work in the construction of a building could be considered as articles manufactured by the assessee. We fail to see how this decision helps Mr. Trivedi is any manner. The Tribunal has not deprived the assessee in the present case of the rebate on the ground that they were not manufacturing articles which were capable of being sold across the counter. The Tribunal has held that the assessee's main activity was not the activity of manufacture or processing of articles or goods. This case, therefore, does not have any relevance to the question in issue.
7. The next decision which has been shown to us is the decision in the case of CIT v. N.U.C. Private Ltd. : 126ITR377(Bom) . In that case our High Court was required to consider the definition of 'industrial company' as laid down in the Finance Act, 1966. Under the Finance Act, 1966, an 'industrial company' was defined as follows :
''Industrial company' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.'
8. In constructing this definition the court held that the activity of construction of ships was mentioned separately from the activity of manufacture or processing goods. Since construction and manufacture were used in contradistinction to each other, a company which was engaged in the construction activity other than construction of ships could not be said to be a company engaged in the manufacture or processing goods. This decision also turns upon the language of the definition of an industrial company. This language is different from the language used in cl. (iii)(A) of Para. D of Pt. II of the First Schedule to the Finance Act., 1964, where there is no reference to construction of ships or any other construction activity. Mr. Joshi strongly relied upon this decision and submitted that the construction activity was held as not an activity of manufacture or processing goods. Since, however, the finding to this effect was given in the decision turns upon the special language of the definition of an industrial company, it is not possible to hold that the matter in the present case is conclusively covered by the authority.
9. Mr. Trivedi, learned counsel for the assessee, drew out attention to a decision of the Delhi High Court in the case of National Projects Construction Corporation Ltd. v. CWT : 74ITR465(Delhi) . In that case the court was required to construe the provisions of s. 45(d) of the W.T. Act, 1957. Under the Explanation to that sub-section, for the purpose of cl. (d) : 'an industrial undertaking' was defined as 'an undertaking engaged in the manufacture, production or processing of goods or articles or in mining or in the generation or distribution of electricity or any other form of power.' In that case the assessee-company was engaged in the activity of construction dams and bridges. The Tribunal had given a finding that the manufacturing work undertaken by the assessee was of considerable magnitude, for which purpose the assessee had large workshops at worksites. The court held that the only condition prescribed by the Explanation to s. 45(d) was that the industrial undertaking should be engaged in the manufacture, production or processing of goods or articles. It was not a condition that the goods should be produced for sale. So long as the activity of manufacture or production was not an occasional activity but was a continuing activity and it was a considerable activity, it could be said that the company was engaged in the manufacture, production or processing of goods or articles. The decision in this case, also turns upon the language of the definition of 'industrial undertaking' under s. 45(d) of the W.T. Act, 1957, and the facts as found by the Tribunal there.
10. In the present case, in order that the company may qualify for rebate, it is necessary that the company should be wholly or mainly engaged in the manufacture or processing goods. In this connection, in the present case, the finding given by the ACC is to the effect that the appellant-company's main business is to construct dams, bridges, buildings and the constructions. It is an engineering company and the work is being done with the extensive aid of machinery. The Tribunal had also held that the assessee is engaged in the work of constructing buildings, bridges, etc. The buildings and bridges, etc., cannot be said to be goods, and, therefore the assessee-company cannot be said to be engaged in manufacturing goods. The Tribunal had also held that the assessee-company cannot be said to be engaged wholly or mainly in the processing of goods, though the assessee-company was required to carry out some processing activity, such as mixing of certain material to make concrete, converting of boulders into stones and so on. It has held that such processing activity was only incidental or subsidiary to the main activity of construction. When compared with the principal business of the assessee, such processing was only a very small component of its activity. In the statement of the case also the activities of the assessee-company are described as construction of dams, bridges, buildings and other constructions. The statement of the case also describes the assessee-company as engineering company whose work is mainly done with the extensive aid of machinery.
11. In view of these findings, it is not possible to accept the contention of Mr. Trivedi that the assessee-company is either wholly or mainly engaged in the manufacture or processing of goods. The main business of the assessee-company is construction business. Any activity which may be described as manufacturing of goods or processing of goods in ancillary to the construction activity of the assessee. At the highest, it can be described as a feeding activity. For, construction activity is a very complex activity involving application of technical know-how, material and skill of trained personnel for the purpose of construction of dams, bridges and so on. The company which is either wholly or mainly engaged in the manufacture or processing of goods.
12. Thus, there is no merit in Mr. Trivedi's contention that manufacture or processing goods is the main activity of the assessee. There is no material to show the extent of the manufacturing or processing of goods which is required for such construction activity. Hence, Mr. Trivedi's contention that manufacture and processing of goods forms a substantial part of the assessee's activities is not supported by any findings of the Tribunal or any other income-tax authority. On the contrary, the Tribunal has given a finding that the activity of manufacture or processing of goods is merely an ancillary or 'incidental activity of the assessee-company and forms only a small component of its main activity. In view of this position, in our view the Tribunal has rightly held that the assessee-company does not qualify for a rebate under prov. (iii)(A) of Para. D. of the First Schedule to the Finance Act, 1964.
13. Under the circumstances, the questions referred to us are answered are as follows :
Questions Nos. 1 and 2 referred to In the negative, that is tous at the instance of the say, in favour of theCommissioner assessee and against theCommissioner.Questions No. 3 referred to us at In the negative, that is tothe instance of the assessee. say, in favour of theCommissioner and againstthe assessee.
14. In the circumstances of the case, the respondent to pay to the application half of the costs of the reference.