Commissioner of Income Tax vs Sunidhi Properties

The following question of law has been referred for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee manufactured and produced "articles" within the meaning of Section 80J(4)(iv) (now Section 80-I(2)(iv) of the Act) of the Income Tax Act, 1961, and thereby directing the Assessing Officer to allow deduction u/s 80I of the said Act in the assessment year 1983-84 ?"

The Income Tax Officer disallowed the claim of the assessee regarding deduction u/s 80I of the Income Tax Act with respect to the construction of multi-storeyed buildings and sale of flats to customers on the ground that the assessee was not entitled to such deduction u/s 80I of the Act. On appeal by the assessee, the Commissioner of Income Tax (Appeals) set aside the aforesaid finding of the Income Tax Officer and held that the activities of construction of multi-storeyed buildings consisting of flats is nothing but manufacture and production of flats which are articles or things within the meaning of Sub-section (4) of Section 80J of the Act. The Income Tax Appellate Tribunal on being approached by the Revenue upheld the decision of the Commissioner of Income Tax (Appeals). It is in this background that the aforesaid question has been referred for our opinion.

In the case of Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, the Supreme Court while interpreting analogous provisions contained in Section 80HH of the Income Tax Act dealing with the expression "industrial undertaking" has clearly held that constructing a dam is not process of manufacture or a process of production. The dam is constructed, it is not manufactured or produced. Similarly, therefore, it can safely be said that a building or a flat is constructed. It is neither manufactured nor produced. Therefore, neither the construction of a building or a flat comes within the purview of the expression "industrial undertaking" nor can it be considered to come within the purview of the expressions "manufacture" or "production", as occurring in Sub-section (4) of Section 80J of the Income Tax Act. The construction of buildings, therefore, being wholly outside the scope and purview of the deduction provision occurring either in Section 80J(4) or Section 80I of the Income Tax Act, the Commissioner of Income Tax (Appeals) and the Tribunal were wholly incorrect in allowing the, deduction to the assessee.

The question is accordingly answered in the negative and in favour of the Revenue.