1. This appeal by the revenue is directed against the order of the Commissioner (Appeals) allowing concessional rate of income-tax, treating the assessee as an industrial company.
2. The assessee is a private limited company engaged in the business of construction of flats and sale thereof. For the assessment year 1978-79, corresponding to the previous year ended on 31-3-1978, the ITO determined the total income at Rs. 97,180 and he imposed tax thereon at the usual rate of income-tax. The assessee appealed to contend that the assessee was to be treated as an industrial company and, therefore, the tax should be imposed at the concessional rate. The assessee relied on the decisions of the High Courts in the cases of CIT v. N.C. Budharaja & Co.  121 ITR 212 (Ori.) and National Projects Construction Corporation Ltd. v. CWT  74 ITR 465 (Delhi) and of the Tribunal in the cases of Ahuja Kashyap (P.) Ltd. [IT Appeal Nos. 1407-1413 of 1974-75, dated 7-4-1977, Delhi Bench 'B'], Bajaj Industrial Finance Ltd. [IT Appeal No. 904 (Delhi) of 1979, dated 31-5-1980, Indore Bench] and of the Madras Bench 'C in IT Appeal No. 44 (Mad.) of 1980, dated 15-11-1980. The Commissioner (Appeals) accepted this contention of the assessee in the view that the decisions cited, supported the contention and, therefore, directed the ITO to treat the assessee as an industrial company and tax it at the rate of 55 per cent instead of 65 per cent.
3. In this appeal the contention of the revenue is that the cases relied on by the Commissioner (Appeals) have nothing to do with the definition of 'industrial company' in the Finance Act since they were decisions given in respect of certain other sections, such as Sections 80J, 80HH and 32A of the 1961 Act, which contained different definitions and were, therefore, out of the present context. It was submitted that since the assessee was not manufacturing any goods the assessee was not entitled to the concessional rate of tax. On the other hand, the contention of the assessee was that though the decisions cited did not relate to the definition under the Finance Act, they related to the concept of industrial company and in the light of the decisions cited what was important was that the assessee had brought together machinery and labour to produce a new article even though it may be immovable property. It was submitted that, in the alternative, since various other items' required for the construction of buildings were manufactured by the assessee, it should be treated as an industrial company in any case.
4. On a consideration of the rival submissions we are of the opinion that the revenue is entitled to succeed. We are concerned with the definition of 'industrial company' in Section 2(7)(c) of the Finance Act, 1978, which is in the following terms: 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.
We are concerned here with the expression 'mainly engaged in the manufacture or processing of goods'. The question is whether the assessee which is engaged in the construction of flats could be considered to be mainly engaged in the manufacture or processing of goods. The answer to the question is self-evident and has to be in the negative. The word 'goods' has not been defined in the Income-tax Act.
But that word is definitely an acceptation to the effect that it does not include immovable property because Parliament has made laws relating to goods as distinct from immovable property. This is evident from the Sale of Goods Act in contrast with the Transfer of Property Act, which again makes the distinction between movable and immovable property. The definition of 'goods' in the Sale of Goods Act refers to every kind of movable property and the definition of movables in the General Clauses Act refers to products of every description excepting immovable property. We also have a definition of 'goods' in the Constitution of India in Article 366(12), which includes all materials, commodities and articles. We may also draw inspiration from the decision of the Supreme Court in the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd.  9 STC 353, which was concerned with the interpretation of item 54 in List II in the Seventh Schedule of the Constitution, namely, taxes on sale or purchase of goods. The Supreme Court observed that the expression 'sale of goods' must be interpreted to have the same meaning as it has in the Sale of Goods Act. In the same way since the legislative history shows that immovable property has never been treated as goods for the purpose of legislation by Parliament it is difficult to accept the contention of the assessee that the construction of flats must be regarded as manufacture or processing of goods. On behalf of the assessee, it was contended that the word 'construction' appearing in the definition may be connected to the word 'goods' as was done by the Madras Tribunal, an extract of which has been given by the Commissioner (Appeals) in his order. Apart from the fact that decision related to a different section, namely, Section 32A and not to the definition under the Finance Act, we find that in the present definition of 'an industrial company' the manufacture or processing of goods is a distinct sub-clause different from the earlier sub-clause relating to construction of ships and, therefore, the word 'construction' can by no stretch of imagination be attached to or qualify the word 'goods' so as to regard the assessee as falling within the definition of an 'industrial company'. We find no substance in the alternative contention of the assessee that the manufacture of other articles required for the construction of flats would be sufficient to qualify the assessee as an industrial company. A reading of the definition shows that the assessee should be mainly engaged in the manufacture of goods and since the assessee is mainly engaged in the construction of flats, the incidental manufacture of any goods would not qualify it as being mainly engaged in the manufacture of goods. We are, therefore, of the considered opinion that the assessee is not entitled to the concessional rate of tax, treating it as an industrial company. We must, therefore, reverse the order of the Commissioner (Appeals) and restore the assessment made by the ITO. The appeal is allowed.