Conversion of trees into logs by de-embarking, seasoning, and cutting the tree trunks amounts to production of a new commercial article or thing within the meaning of Sections 32A, 80HH, and 80J of the Income Tax Act, 1961.

( 1 ) THE deduction under Sections 32a, 80hh and 80j of the IT Act, 1961 relevant to asst. yrs. 1983-84 and 1985-86 is in controversy before us. The Department's submission:

( 2 ) MR. S. N. Dutta, learned counsel for the Department, had pointed out that the learned Tribunal and the AO were right in holding that the business of the assessee did not qualify for the deduction under the said three sections. Since conversion of trees into logs does not change the nature and character of the tree and when it is converted into logs, it retains the same characteristics of wood and as such it does not amount to production, particularly, when no new commodity emerges out of such activity. Submission of the assessee/appellant:

( 3 ) MR. R. N. Dutta, learned counsel appearing on behalf of the assessee, on the other hand, contends that a tree when felled is not a commercially saleable article but when it is de-embarked and cut into pieces and logs are produced by seasoning the same, it becomes a commercially saleable article or thing. The concept of manufacture need not be introduced thereto. Applicability of the decisions cited:

( 4 ) BOTH the learned counsel in support of their respective contentions have relied upon various decisions to which we shall be referring at appropriate stage. In order to assert that the conversion of trees into logs does not bring out a new commodity and as such would not amount to production, Mr. S. N. Dutta had relied upon a decision in CCE v. Kutty Flush Doors and Furniture Co. (P) Ltd. This decision may not help us in the present context since it was a case under the Central Excises and Salt Act, 1944, where the classification of particular goods was the subject matter for consideration. This may not help us to interpret the principles relating to determination of question where classification is not at all material. (1) Mr. S. N. Dutta next relied upon the decision in Dy. CST v. Pio Food Packers. This case was also related to sales-tax for determining as to the consumption of a commodity in the process of manufacture which also may not help us for the purpose of interpretation of the provisions of the Income-tax Act, (IT Act); inasmuch as there the only consideration was whether the particular raw material was consumed for manufacturing of new article or thing. Therefore, that decision would not help us in the present context. (2) In order to counter the said proposition, Mr. R. N. Dutta relied on a decision of the Supreme Court in Gem Granites v. CIT, wherein it was held that provisions in Central Excise Tariff Act and Customs Tariff Act may not come in proper aid to construing the provisions of the IT Act in course of interpretation of statutes. In the said decision, the apex Court had observed that both under the Customs Tariff Act and the Central Excise Tariff Act, a distinction is made between minerals and processed minerals relevant for classification. However, a classification which is relevant for the purpose of determining the rate of duty under those Acts cannot be imported into the IT Act which makes no such distinction.

( 5 ) BEFORE we proceed to decide the question as to what would mean by production for the purpose of the three sections with which we are now concerned, we may look at the object and purpose of incorporation of these provisions in the IT Act. A plain reading of these provisions clearly indicates from the very scheme that has been provided for that these are really in the form of incentive for industrial growth and development. The object cannot be overlooked while interpreting statute. A construction, which advances the object, is to be preferred than that which is opposed to it. It was so held in Bajaj Tempo Ltd. v. CIT, cited by Mr. R. N. Dutta. In the said decision, the apex Court had observed that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Relying on Broach Distt. Co-operative Cot