D.K Kapur, J.:— By a common statement of case, reference has been made under section 256(1) of the Income-tax Act, 1961, to this court raising identical questions of law for the assessment years 1971–72 and 1972–73. The assessee is a private limited company engaged in the business of construction of buildings. The short point for decision is the rate of income-tax chargeable on the company. According to the assessee's case, it is an “industrial company” which should be charged at 55%, but the Income-tax Officer imposed the tax at 65% as in the past. According to the assessee, various manufacturing processes were involved in the construction of buildings and, hence, the assessee should be treated as an “industrial company The Appellate Assistant Commissioner rejected the assessee's appeal on the ground that it did not manufacture or process goods. On a further appeal to the Tribunal, it was held that the construction of buildings also involved manufacturing processes, like moulding of R.C.C slabs, fabrication of steel doors and steel windows. It was observed by the Tribunal that though the assessee did not market these goods, it employed machinery for doing the work as part of the building process. The Tribunal held that the assessee was engaged in the manufacture and processing of goods. It was accordingly held that the concessional rates of income-tax specified in section 2(6)(c) of the Finance Acts of 1971 and 1972 were applicable to the assessee and the chargeable rate was 55%.

2. The question referred to us in the two assessment years is as follows:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee company was an industrial company entitled to be taxed at the concessional rates prescribed under section 2(6)(c) of the Finance Acts of 1971 and 1972 for the assessment years 1971–72 and 1972–73?”

3. The view of the Tribunal has been challenged before us by the Department and a large number of cases have been cited at the Bar by both sides. The only question involved in this case is whether the assessee can be described as an “industrial company” within the meaning of the definition set out in the Finance Acts of 1971 and 1972. The said definition is 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.

Explanation.—“For the purposes of this clause, a company shall be deemed to be 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, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty-one per cent, of such total income.”

4. If we examine this provision without reference to any case law, it indicates that an industrial company is one whose main business may consist of any of the following—(a) business of generation or distribution of electricity or any other form of power, (b) construction of ships, (c) manufacture or processing of goods, and (d) mining. The assessee company claims that it manufactures or processes goods and so it is an “industrial company”. However, the end product in the case of the company seems to be a building and not any goods. Furthermore, the Explanation shows that the question whether the main business is of generation or distribution of electricity, etc., or manufacturing or processing of goods has to be decided by ascertaining whether fifty-one per cent, of the assessee's total income is derived from one of those activities. This means that fifty-one per cent, at least of the assessee's income must come from manufacturing or processing of goods. The mere fact that the company makes R.C.C slabs or steel doors and windows, as held by the Tribunal, is not sufficient. In addition, fifty-one per cent, of its total income must come from this manufacturing process. It is now necessary to refer to some of the cases which have been cited before us.

5. In CIT v. Tata Locomotive & Engineering Co. Ltd., [1968] 68 ITR 325 (Bom), it was held that assembling a motor vehicle from knocked-down parts imported from Germany is a process of manufacturing. We do not see how this judgment is of any help in the present case.

6. In CIT v. Pressure Piling Co. (India) Ltd., [1980] 126 ITR 333 (Bom), the assessee company was using a manufacturing process for laying foundations for buildings by pressure piling. The question was whether relief under section 84 (now section 80J) was to be allowed to the assessee as an “industrial undertaking”. It was held that the assessee was engaged in either maunfacturing or production. The definition in section 84 (or section 80J) is quite different and so this judgment does not help much.

7. A more relevant case decided by the Bombay High Court is CIT v. N.U.C Private Ltd., [1980] 126 ITR 377. In that case, the court interpreted the definition of “industrial company” to mean that it covers only construction of ships and not construction of anything else. It was also held that the making of doors and window frames, concrete beams and slabs was a step in the construction of a building. The business could not be divided into two parts: (a) making of windows and doors, and (b) construction. It was accordingly held that the assessee fell outside the definition of “industrial company”.

8. It may be noted that in the course of arguments in that case, it had been urged that the percentage of profit from making windows, doors and slabs was greater than the income from the other business of construction. This contention was negatived. The court held (p. 381 of 126 ITR):

“Apart from the fact that there is nothing on record to show separately the income derived by the assessee from its so-called different activities, one of constructing buildings and the other of manufacturing frames and beams, we have already held that the assessee company was not carrying on the said activity of manufacturing frames, etc., independently of, or otherwise than in the process of, the construction of the buildings. It is not, therefore, permissible to divide its activity into the said two segments to compare the income from one with the other. The assessee company's only business is that of construction and repairing of buildings and there are no two activities carried on by it as contended by Shri Khatri.”

9. Another case referred to us was CIT v. Lakhtar Cotton Press Co. (Pvt.) Ltd., [1983] 142 ITR 503 (Guj). In this case, the business was ginning and pressing of cotton which was accepted by the Gujarat High Court to be processing and manufacturing. In CIT v. Shah Construction Co. Ltd., [1983] 142 ITR 696 (Bom), the work of the company was constructing flats and the question raised by the assessee was that it was engaged in the manufacture and processing of goods. The court referred to the judgment of the Delhi High Court in National Projects Construction Corporation Ltd. v. CWT, [1969] 74 ITR 465. It noted that the definitions involved in the National Projects Construction Ltd., decided by the Delhi High Court and Pressure Piling Co. (I) Pvt. Ltd., [1980] 126 ITR 333, decided by the Bombay High Court, were in relation to different provisions of law. In the result, the court held that the main business of the assessee company was construction business and any step involved in that construction business was only ancillary to the construction activity of the assessee and, hence, the concessional rate specified in the Finance Act, 1964, was not applicable in relation to supertax.

10. In CIT v. M.R Gopal, [1965] 58 ITR 598, it was held by the Madras High Court that quarrying was a manufacturing process and hence being an industrial undertaking was entitled to exemption under section 15C of the Indian Income-tax Act, 1922. For the purpose of section 23A of the Indian Income-tax Act, 1922, a firm printing balance-sheets, profit and loss accounts, dividend warrants, pamphlets, share certificates, etc., was held to be a manufacturer of goods in CIT v. Ajay Printery Private Ltd., [1965] 58 ITR 811, decided by the Gujarat High Court.

11. Most of the other judgments cited before us relate to the concessions which are available to industrial-undertakings under the provisions which correspond to section 80J of the present Income-tax Act. One of these judgments has to be referred to by us as it is the main judgment relied upon by the assessee. This is the case of National Projects Construction Corporation Ltd. v. CWT, [1969] 74 ITR 465 (Delhi). This was a case involving the application of section 45(d) of the Wealth-tax Act, 1957, which provided that the Act shall not apply to a company established with the object of carrying on an industrial activity. An industrial undertaking was defined as an undertaking engaged in the manufacture, production or processing of goods. The asbessee in that case was engaged in the construction of barrages and dams on a large scale. It was processing steel, crushing Stone, manufacturing liijne and surkhi and also excavated stone from rocks. The court came to the view that the definition was such that an undertaking engaged in the manufacture of goods for its own use was also exempt and when manufacturing was being carried on, the assessee was exempt. It was also observed that there was no necessity that the manufacturing should result in the sale of the product in the market.

12. It is unnecessary to analyse these authorities in greater detail because the decision of the court must necessarily turn on the particular statutory provision which is under examination. In a case falling under section 15C of the Indian Income-tax Act, 1922, or section 84 or section 80J of the Income-tax Act, 1961, the principal question to be examined by the court is whether the company in question is an “industrial undertaking”. For this purpose, it has to be seen whether the particular company is engaged in the process of manufacturing or processing of goods. At the same time, under section 45(d) of the Wealth-tax Act, certain companies were exempt from wealth-tax. It so happened that M/s. National Projects Construction Corporation Ltd. was a company which was engaged in some manufacturing activity and so it was exempt. No question of percentage of profit was involved. It is now necessary to revert to the definition of “industrial company”, and also to point out again the decisions quoted earlier, in which courts have taken the view that a construction company is not an “industrial company The operative words of the definition are “construction of ships or in the manufacture or processing of goods”. If we examine the case of ships, any company engaged in the making of ships will be entitled to be treated as an industrial company if at least fifty-one per cent, of its total income is derived from that activity. Similarly, in a case where an assessee company manufactures or processes goods, if fifty-one per cent, of its total income comes from this activity, it can be treated as an “industrial company”. The assessee company does building work as a contractor and in the process of that work, some manufacture has to be done like the manufacture of doors, windows, R.C.C slabs and so on. These activities can be said to result in the mamifacture of goods but they are really part of the building work. On the other hand, to give a meaningful purpose to the Act, it must be understood that the definition is to operate in respect of companies which are “industrial companies” in the proper sense, i.e, they must be manufacturing or processing goods. In this case, the assessee consumes doors and windows and bricks in making buildings. It cannot be described as a manufacturer or processor in respect of this activity. Of course, as we are to determine whether the assessee is an industrial company, we have to examine whether the definition applies to the assessee., If we examine the definition as a whole, the concessional rate is available to a company engaged in the generation or distribution of electricity or any other form of power. An electric supply company or a gas supply company or any such power supply company will be treated as an industrial company. Similarly, companies engaged in the construction of ships or in the manufacture or processing of goods, or in mining, are also to be treated as industrial companies. It so happens that the assessee uses bricks manufactured by others in making buildings. It also makes R.C.C slabs, etc., in the process of making those buildings. Can it reasonably be said that the assessee is a manufacturer or processor of goods? In the sense that the assessee makes a building, it can loosely be said that the assessee is a manufacturer. But it is not manufacturer of goods. It is a manufacturer of buildings and buildings are not goods. Similarly, when it is asked whether the assessee is a processor of goods, it cannot be said that the assessee is a processor of goods, but it is using goods in the manufacturing or construction of buildings. The real activity of the assessee is to construct buildings which is not processing or manufacturing of goods.

13. A case very appropriate to the nature of the assessee's intention is the one decided by the Kerala High Court in CIT v. Casino (Pvt.) Ltd., [1973] 91 ITR 289. In that case, the assessee was a private limited company running a hotel business. It claimed to be an industrial company on the ground that it was buying raw materials which, after cooking were converted into foodstuff which was served in the business. It was, therefore, engaged in the manufacture and processing of goods. The court held that the hotel was really a trading business. It was not appropriate in the ordinary sense to refer to the production of foodstuffs in the hotel as being the manufacture or processing of goods. This case is an appropriate example of a reasonable interpretation of the words used in the section. The court referred to the necessity of the common parlance method of interpretation. It was observed (p. 293):

“The natural meaning, according to the accepted usages of English speech, must be given to the term. The context or the setting in which the term appealrs and the nature of the enactment is also of relevance in understanding the meaning of the term. It must be said here, by way of abundant caution, that though this is normally the rule, this need not be taken to be an absolute rule of construction.”

14. An elaboration of this is not really necessary. The court has taken a common sense point of view in holding that a hotel which sells food to its customers is not a manufacturer or processor of goods. In the sense that the assessee company utilises bricks and other building materials to make a building, it cannot be said to be a processor of goods. In the same way, making doors or windows for a building is not manufacture. As held by the Bombay High Court, construction was the main object and the process of manufacture of doors and windows was an ancillary object. This view was accepted again inj that High Court in the case of Shah Construction Co. Ltd., [1983] 142 ITR 696. It seems reasonable to apply the definition in the same way as the Bombay High Court unless there is something very wrong in the interpretation of the Act. Learned counsel for the assessee had urged that an interpretation favourable to the assessee should be accepted if there are two possible views. We accept this. However, inasmuch as the assessee is a manufacturer of buildings or constructor of buildings, an intermediary stage should not be taken to convert the assessee into a manufacturer of goods. A transitory or evanescent product like an R.C.C block or a door is only a step towards making the whole building. It would not be reasonable to say that the assessee is a manufacturer or processor of goods as understood in common parlance, in the context of the definition of “industrial company” given in the Finance Acts of 1969 and 1970. If we look at some other definition like the definition of “industrial undertaking” in section 80J of the Income-tax Act, 1961, or the equivalent section 15C of the Act of 1922, we might get a different result. In the context of the section now being examined, we agree with the view of the Bombay High Court.

15. We would accordingly answer the question referred to us in the negative, in favour of the Department and against the assessee. In view of the difficulty of the question, we leave the parties to bear their own costs.