2. The assessee is a firm carrying on business of exports. The assessee had claimed weighted deduction in respect of certain expenses under Section 35B of the Income-tax Act, 1961 ('the Act'). The ITO disallowed the said claim on the ground that it was inadmissible in view of the fact that at least one of the essential conditions enumerated in Sub-section (1A) of Section 35B had not been fulfilled. The Commissioner (Appeals) has upheld this finding and the assessee has now come in appeal before us and the point to be considered at present is whether those conditions are satisfied.
3. Sub-section (1A) of Section 35B was inserted with effect from 1-4-1978, by the Finance Act, 1978, and was omitted with effect from 1-4-1980 by the Finance Act, 1979. That sub-section was in force in the assessment year 1979-80, with which we are concerned in this appeal.
That subsection was as follows: (1A) Notwithstanding anything contained in Sub-section (1), no deduction under this section shall be allowed in relation to any expenditure incurred after the 31st day of March, 1978, unless the following conditions are fulfilled, namely:-- (i) the business of export of goods and is either a small-scale exporter or a holder of an Export House Certificate; or (ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know-now, to persons outside India; and (b) the expenditure referred to in that sub-section is incurred by the assessee wholly and exclusively for the purposes of the business referred to in Sub-clause (i) or, as the case may be, Sub-clause (ii) of Clause (a).
4. The assessee's case is that the assessee was a small-scale exporter and, therefore, condition mentioned in Clause (a)(i) of Sub-section (1A) of Section 35B was fulfilled. The ITO and the Commissioner (Appeals) have held that condition is not satisfied. The crucial question, therefore, is whether the assessee was a 'small-scale exporter' within the meaning of that expression in Sub-section (1A) of Section 35B.5. The term 'small-scale exporter' has been defined in the Explanation in said sub-section, which reads as follows: (a) 'small-scale exporter' means a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertakings owned by him: Provided that such person does not own any industrial undertaking which is not a small-scale industrial undertaking; 6. It is not disputed before us that the assessee does not own any small-scale industrial undertaking. According to the assessee, it purchases goods from small-scale industrial undertakings and then exports them. The ITO and the Commissioner (Appeals) have held that the said fact, even if established, would not bring the assessee in the category of 'small-scale exporter' and as such, condition under Clause (a)(i) of Sub-section (1A) of Section 35B would not be fulfilled.
7. The contention on behalf of the assessee is that the words 'owned by him' in Clause (a) of the Explanation, qualified the word 'undertakings' only and that the said words did not qualify the prior word 'undertaking', with the result that what all that was necessary, in order to come within the ambit of the term 'small-scale exporter', was that the person concerned should have been exporting goods manufactured or produced in any small-scale industrial undertaking and that it was not further necessary that the said small-scale industrial undertaking should be owned by him. It is only when the export was of the goods manufactured and produced in more than one undertaking that it was further necessary that all those undertakings should be owned by him. It was further submitted that if the words 'owned by him' had been intended to qualify 'undertaking' also, the further words 'or undertakings' would not have occurred because the term 'any undertaking' would have included within its ambit more than one undertaking also.
8. We are unable to accept the contention of the assessee. A plain reading of the said clause does not create any doubt on the point that the words 'owned by him' qualify both 'undertaking' as well as 'undertakings'. If the intention had been that the words 'owned by him' should not qualify the words 'any small-scale industrial undertaking' but should qualify only 'undertakings', the words 'small-scale industrial undertaking' would have been repeated after the word 'or'.
We are also not impressed by the submission that the word 'undertakings' would become superfluous if we hold that the words 'owned by him' govern the words 'any small-scale industrial undertaking' also. Sometimes the words are added out of abundant caution in order to word off future possible controversy about meaning.
9. Our attention was drawn to the fact that in the Circular No. 240, dated 17-5-1978--Taxmann's Direct Taxes Circulars, Vol. 2, 1980 edn., p. 618--issued by the Board explaining the scope of Sub-section (1A), the words 'small-scale industrial undertaking' were put under inverted commas and it was contended that this indicates that the Board itself had thought that the words 'owned by him' governed the word 'undertakings' only and not the words 'any small-scale industrial undertaking'. We are unable to draw this inference from omission in the circular to put the words 'undertakings owned by him' inside the inverted commas in juxtaposition with the words 'small-scale industrial undertaking'. We have perused the said circular and there is nothing therein to give an impression that the words 'owned by him' qualify only 'undertakings' and not the earlier words 'any small-scale industrial undertaking'.
10. It was then submitted before us that the total purchases were to the extent of Rs. 18,89,705.40. Out of which, goods manufactured by small-scale industrial undertakings not owned by the assessee were to the extent of Rs. 11,21,408, while the balance of Rs. 7,68,297 represented the purchases made from other small-scale industrial undertakings in which the assessee got embroidery work done by paying labour charges before exporting and as such claim for Rs. 7,68,297 should be investigated. This claim was not put forth before either the ITO or before the Commissioner (Appeals). This question does not arise out of the order of the Commissioner (Appeals) and it has not also been raised specifically in the grounds of appeal. Besides, by merely getting the cloth embroidered, it cannot be said that the goods in question had been manufactured or produced in any small-scale industrial undertaking owned by the assessee.
11. The decision in CIT v. Neo Pharma (P.) Ltd.  137 ITR 879 (Bom.), on which the learned counsel for the assessee relied, is of no assistance on the point with which we are concerned. In that case, the assessee-company, which had been incorporated with the object of manufacturing or processing Pharmaceuticals, had entered into an agreement with another company to make available to the assessee, plant, machinery and the services of staff of other company to carry on its manufacturing activity and the products were manufactured by other company under the direct supervision of the assessee's own technically qualified staff and the assessee's own quality control All raw materials were purchased and supplied by the assessee. It was on these facts that it was held that operation amounted to manufacture of Pharmaceuticals by the assessee, with the result that the assessee came within the ambit of the term 'industrial company' in the Finance Act, 1966. In our case, we are concerned with the expression 'goods manufactured or produced in any small-scale industrial undertaking owned by him' (the assessee). The cloth is said to be purchased from others and got embroidered by the assessee by paying labour charges. It cannot be said that finished goods are manufactured or produced in any small-scale industrial undertaking owned by the assessee. The principle of the Bombay High Court decision does not at all apply to facts alleged and on this ground also, there is no question of directing investigation of the claim made for the first time before us.
12. For the reasons already given, we hold that the lower authorities were justified in holding that one of the essential conditions mentioned in Section 35B(1A) was not satisfied and as such, on that ground alone, relief under Section 35B(1A) was not allowable.