Galvanizing metal on behalf of customers does not amount to manufacture or production of articles within the meaning of Section 84 of the I. T. Act, 1961.

SABYASACHI MUKHARJI, J.

( 1 ) IN this case under Section 256 (1) of the I. T. Act, 1961, the following question has been referred to this court:"whether, on the facts and in the circumstances of the case, the Tribunal has misdirected itself in law in holding that the business carried on by the assessee in galvanizing metal on behalf of the customers was an industrial undertaking engaged in manufacture and production of articles within the meaning of Section 84 of the Income-tax Act, 1961, and as such the assessee was entitled to relief under Section 84 of the said Act for the assessment year 1965-66 in respect of profits derived from such business ?"

( 2 ) THE assessment year involved is 1965-66 and the previous year ended on March 31, 1965. The assessee is a private limited company. During the year the assessee-company carried on the business of manufacturing and sale of metals and also in galvanizing work for outsiders. The assessee claimed exemption of tax under Section 84 in respect of business of manufacturing and sale of metals and its galvanizing work. The ITO held that the assessee was not entitled to relief under Section 84 in respect of trading in raw materials from which a gross profit of Rs. 2,926 was earned. The galvanizing work from outsiders was started in the previous year and the assessee received a sum of Rs. 44,673 as galvanizing charges. The ITO was of the view that the business of galvanizing for outsiders did not involve manufacture or production of any articles as contemplated under Section 84 (2) (iii) of the I. T. Act, 1961. He, therefore, refused the benefit of relief under Section 84 to the assessee with respect to galvanizing work.

( 3 ) THE assessee went up in appeal before the AAC. The AAC held that the work of converting ordinary metal into galvanizing metal did not amount to manufacture of goods as the raw material which was converted into finished products did not belong to the assessee. He, therefore, affirmed the action of the ITO on this aspect. There was an appeal before the Income-tax Tribunal and after discussing several authorities the Tribunal was of the view that the work of galvanizing in this case came within the purview of Section 84 (2) (iii) and, therefore, the assessee was entitled to the benefit. In the premises, the question mentioned hereinbefore has been referred to this court. We are, therefore, concerned with the question whether the business carried on by the assessee in galvanizing metal on behalf of the customers was an industrial undertaking engaged in manufacture and production of articles within the meaning of Section 84 of the I. T. Act, 1961. Section 84 of the I. T. Act, 1961, as it stood at the relevant time, provides as follows ;"84. (1) Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or business of a hotel or from any ship, to which this section applies, as does not exceed six per cent. per annum on the capital employed in such undertaking or business or ship, computed in the prescribed manner. "

( 4 ) SUB-SECTION (2) of the said section applies to any industrial undertaking which fulfils all the following conditions, namely :" (i) It is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose; (iii) it manufactures or produces articles or operates one or more cold storage plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of twenty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking ma

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