JUDGMENT

R.N. Misra, J. - The Income-tax Appellate Tribunal, Cuttack Bench, has stated these cases as directed by this court on the applications of the revenue under s. 256(2) of the Income-tax Act, 1961 (hereafter referred to as "the Act") and has referred the following common question for opinion of the court:

"Whether, on the facts found by the Appellate Tribunal, the assessee is entitled to the benefit provided under section 80HH of the Income-tax Act, 1961?"

The relevant assessment years are 1974-75 and 1975-76. S.J.C. Nos. 97 and 98 of 1975 relate to one registered firm which had undertaken construction of a minor irrigation project in the district of Dhankanal. The first reference is with respect to the assessment year 1974-75 and the other for the subsequent assessment year. S.J.C. No. 99 of 1978 relates to assessment year 1975-76 and the assessee therein, another registered firm, undertook erection of the Sundar Irrigation Project. According to the assertion of the revenue, the firms had come into existence for execution of the particular works and were to stand dissolved when the works were over. The ITO while assessing the firms conceded relief under s. 80HH of the Act to both the assessees. The CIT in exercise of powers under s. 263 of the Act came to hold:

"The concession provided u/s. 80HH is available to an industrial undertaking which manufactures or produces articles.. It would thus appear that to constitute manufacture or produce articles it is necessary that the material subjected to manufacture should be changed or modified and something tangible should come out as a result of manufacturing process to make it capable of being sold..... In short the firm cannot be held as an industrial undertaking merely because it has to undertake certain manufacturing process in the course of construction of the irrigation project."

and directed the ITO to withdraw the relief and modify the assessments of the firms as also the partners. The assessees appealed to the Appellate Tribunal. The Tribunal found :

"The assessee before us is engaged in the construction of a dam which is an irrigation project of considerable magnitude. It employed considerable labour, machinery and capital as is apparent from its balance-sheet and profit and loss account. The work was done for a considerable period of time. The net product is only one, i.e., a particular dam. The product became the property of the contractee as soon as it was brought into existence. For the purpose of building the dam, the assessee had to excavate, bring big boulders, break them into small ones and engage in a variety of engineering activities. In other words, it displaced certain materials from the site of the dam and brought other materials to the said site and performed various engineering processes. It is true that the net product is composed of its components but the commercial use and value of the net product is completely different from those of its components. These activities are not only 'processing' as held in the case of Addl. Commissioner of Income-tax v. Farukkabad Cold storage (P.) Ltd. [1977] 107 ITR 816 , but also come within 'manufacture' as held in the case of Commissioner of Income-tax v. Tata Locomotive Engineering Co. Ltd. [1968] 68 ITR 325 . The article finally produced had considerable commercial value for which a heavy payment was received by the assessee. Taking all the facts and circumstances of the case into consideration, we have no doubt in our mind that the assessee was engaged in 'industrial activities' as opposed to 'trading activities' or 'agricultural operations' in a backward area within the meaning of section 80HH of the Act."

Accordingly, the Tribunal vacated the order of the Commissioner and restored the benefit extended by the ITO. The revenue challenges the action of the Tribunal -

Section 80HH, as far as relevant, provides:

"(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof.
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely -

(i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970, in any backward area:;
(ii) it is not formed by the splitting up or the reconstruction, of a business already in existence in any backward area:.....;
(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area;
(iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power......"

The marginal heading of this section reads thus:

"Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas."

and the provision was inserted by the Direct Taxes (Amend.) Act of 1974 with a view to boosting of development activities in backward areas. Sub-section (1) provides the concession which extends to an industrial undertaking as also to the business of a hotel. Sub-section (2) lays down the conditions which an industrial undertaking has to fulfil in order to entitle itself to the concessional benefit while sub-s. (3) provides the conditions which are to be fulfilled in respect of business of any hotel to come within the purview of the section. The CIT had used two grounds for vacating the order of the ITO, namely:

(i) the assessee was not an industrial undertaking engaged in manufacture or production of articles; and
(ii) the assessee-firms were short-lived ones and were to cease to exist the moment the works were completed. In view of sub-s. (4) of s. 80HH, the benefit could not have been contemplated to apply to such short-lived undertakings. While calling for a statement of the case a Bench of this court had indicated;

"The second ground advanced by the Commissioner seems to be wholly without any basis. There is no foundation for the view entertained by the Commissioner that the relief provided under section 80HH is connected with the longevity of the industry. The benefit is available for a total period of ten years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles and the rate of relief is indicated in sub-section (1) . In case, the industrial undertaking ceases to exist within the period of ten years, there would be no recurring benefit for the remaining period out of the ten years. There is no basis for the assumption of the Commissioner that the benefit is not admissible to an undertaking which does not last for a minimum period of ten years."

We are in accord with the view indicated and, therefore, do not propose to deal with that aspect of the matter. The only question which arises for consideration is whether the assessee qualifies for the concession available under s. 80HH of the Act.

At the hearing the learned standing counsel contends that in order to be entitled to the benefit as provided under sub-s. (1) of s. 80HH of the Act, the conditions indicated in sub-s. (2) thereof have to be fulfilled. There can be no dispute so far as this submission goes. Counsel for the revenue next contends that the assessee must not only be an "industrial undertaking" as referred to in sub-s. (1) but must be manufacturing or producing articles as indicated in sub-s. (2) (i) of the Act. A firm of contractors engaged in the construction of a dam does not manufacture or produce articles and as such it does not satisfy one of the tests in sub-s. (2) . Since all the conditions in sub-s. (2) are to be satisfied as a condition precedent to availing the concession, the Tribunal went wrong in extending the concession to the assessee.

Mr. Rath for the assessee, on the other hand, has argued that it was not the legislative intention in sub-s. (2) (i) to confine the benefit under sub-s. (1) to industrial undertakings engaged only in manufacture or production of articles. Condition No. (i) in sub-s. (2) was intended to emphasise upon two aspects, namely, that the operation should be in a backward area and the business should have commenced after 31 st of December, 1970.

"Industrial undertaking" has no statutory definition. Law is fairly settled that where there is an absence of a statutory definition, it would be open to look for the meaning by referring to the definitions in sister legislations and failing that, to adopt the common parlance meaning. There can be no dispute that the business of a contractor who has undertaken the construction of an irrigation project would be an industrial undertaking for the purposes of the Industrial Disputes Act. The concept of industrial undertaking need not necessarily be confined to manufacture and production of articles. Even in the absence of either of them, in the strict sense there could be an industrial undertaking. The Tribunal in the instant case has clearly recorded a finding of fact that the assessee had undertaken manufacture of certain materials which it ultimately utilised in the construction of the dam and it worked for the ultimate production of a dam. Assessee's counsel has canvassed that there is no warrant for the submission of learned standing counsel that a dam would not be an article. "Article". according to the Shorter Oxford English Dictionary, means "a commodity; a piece of goods or property". It need not be confined to movable property. There would be no justification to hold that a dam is not an article in that sense of the term. We would reiterate here that there is considerable force in Mr. Rath's argument that it was not the intention of Parliament in sub-s. (2) (i) to exclude industrial undertakings which did not manufacture or produce articles, from the benefit and even if one was an industrial undertaking not engaging itself in manufacture or production of articles, it could as well have the benefit if the work had begun after 31st of December, 1970, in a backward area. Clause (i) of sub-s. (2) was connected with the period and the area where the operation was to be undertaken and not the nature of operation. If the legislative intention was restriction with reference to the nature of the operation, clear provision would certainly have been made either by providing a definition or adding an Explanation. Learned counsel for both the parties have indicated to us that there is no direct precedent on the point. We have not, therefore, considered it necessary to refer to the authorities cited by the Commissioner or the Appellate Tribunal.

We are of the view that the finding of the Tribunal that each of the assessees was entitled to, in the respective years, the benefit under s. 80HH of the Act is unexceptionable. Our answer to the question referred, therefore, is that the Tribunal was right in holding that the assessees were entitled to the benefit as provided under s. 80HH of the Act.

Assessees shall have the costs of these references. Consolidated hearing fee is assessed at rupees two hundred.

N.K. Das J. - I agree.