1. The department is in appeal and the assessee has filed cross-objection and both these arise out of the common order of the Commissioner (Appeals) for the assessment year 1978-79.
2. The question at issue is whether the firm engaged in the business of constructing dams, etc., was entitled to deduction under Section 80HH of the Income-tax Act, 1961 ('the Act'). The ITO held that the assessee was not entitled to deduction while the Commissioner (Appeals) held in favour of the assessee.
3. We have heard the learned departmental representative and also the learned counsel for the assessee. The learned departmental representative placed reliance on the order of the Full Bench in the case of ITO v. Hydle Constructions (P.) Ltd.  6 ITD 575 (Delhi) for the proposition that the assessee was not entitled to deduction under Section 80HH, because the end product of the assessee being a dam cannot be considered to be an article within the meaning of Section 80HH(2)(i) The learned counsel for the assessee did not dispute that the Full Bench order did cover the point at issue but his contention was that we should follow the decision of the Bombay High Court in CIT v. Hindustan Antibiotics Ltd.  93 ITR 548 in preference to the Gujarat High Court ruling in Cellulose Products of India Ltd. v. CIT  110 ITR 151, which has been followed by the Full Bench of the Tribunal. It was urged that this Bench sitting in Bombay was bound to follow the decision of the Bombay High Court.
4. The learned departmental representative placed reliance on the ruling of the Bombay High Court in CIT v. Shah Construction Co. Ltd.  142 ITR 696 but the learned counsel for the assessee pointed out that it was a case not under Section 80HH and was, therefore, not applicable.
5. We have heard the rival contentions. Dealing first of all with the contention of the learned counsel for the assessee we find that in Hindustan Antibiotics Ltd.'s case (supra) the Bombay High Court had held that the assessee could not be said to have started manufacturing articles when it manufactured crude penicillin the samples of which were required to be sent to the USA and the UK for obtaining certificates as to their quality. Only when the assessee started regular production of sterilised penicillin, the only product that could be sold in the market, can the assessee be said to have started manufacturing an article within the meaning of Section 15C of the Indian Income-tax Act, 1922. The Gujarat High Court in Cellulose Products of India Ltd.ls case (supra) took the view that when the company started production of cellulose pulp, which was an intermediate product, in its cellulose project, it could not be said to have begun to produce or manufacture articles within the meaning of Section 84 of the Act. On the face of it, there is really no conflict between the rulings of the Bombay and Gujarat High Courts, though on p. 554 the Bombay High Court appears to have held that when the assessee starts manufacturing articles which are capable of being used by it for manufacture or production of the finished goods, which are ultimately sold by the company, it can be said to have started the manufacture or production of goods.
6. In our opinion, the difference between the two rulings has really no bearing on the point at issue that arises in this appeal before us. The Bombay High Court ruling in Shah Construction Co. Ltd.'s case (supra) was dealing with a case under Schedule I, Part II, Para D of the Finance Act, 1964, and the question at issue was whether the assessee-company was entitled to rebate which it would be entitled if it was wholly or mainly engaged in the manufacture or processing of goods. The assessee in that case was engaged in the construction of dams, bridges, buildings, etc. The Tribunal held that the buildings and bridges, etc., could not be said to be 'goods' and the assessee-company could not said to be engaged in the manufacture of goods. The Bombay High Court upheld that finding. The Tribunal further held that whatever little processing of goods the assessee was involved in, such as mixing of certain materials to make concrete, the cutting of boulders into stones, etc., it 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. The High Court upheld this finding also and held that any activity of the assessee which might be described as 'manufacture of goods or processing of goods' is ancillary to the construction activity of the assessee. At the highest, it could be described as a feeding activity.
7. In our opinion, this ruling of the Bombay High Court clinches the issue in favour of the revenue because if the construction of buildings and bridges were to amount to manufacture of goods or articles, then the company would certainly have been declared as an industrial company entitled to rebate because if its main business fell within the definition of 'industrial company' then it would amount to its being wholly or mainly engaged in the manufacture or processing of goods, but the High Court did not hold it to be so. Therefore, the contention of the learned counsel for the assessee is of no avail. The ruling of the Full Bench in the case of Hydle Constructions (P.) Ltd. (supra) is clearly applicable. It is true that the ruling of the Orissa High Court in the case of CIT v. N.C. Budharaja & Co.  121 ITR 212 is directly on the point at issue, i.e., under Section 80HH, but in view of the later decision of the Bombay High Court in Shah Construction Co.
Ltd. 's case (supra) and also the decision of the Full Bench of the Tribunal, we are unable to follow the Orissa High Court ruling in this regard in spite of the fact that the learned counsel pressed us to follow that ruling in view of the Bombay High Court decision in CIT v.Smt. Godavaridevi Saraf  113 ITR 589. We, therefore, hold that the Commissioner (Appeals) was in error in holding that the company was entitled to Section 80HH deduction. We set aside the order of the Commissioner (Appeals) and restore that of the ITO.8. In the light of our above discussion, the cross-objection filed by the assessee becomes infructuous.
9. In the result, the appeal filed by the department is allowed. The cross-objection of the assessee is dismissed.