A cold storage unit cannot be held to be an industrial undertaking engaged in the business of manufacturing or producing articles, and therefore cannot satisfy the condition in clause (i) of sub-section (2) of section 80HHA.

JUDGMENT :

G.B. Patnaik, J. - On an application being filed by the department u/s 256(1) of the income tax Act, 1961 ('the Act'), the Tribunal formulated the following two questions for opinion of this Court and has made a statement of the case:

" 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee-firm was entitled to deduction u/s 80HHA of the income tax Act, 1961?

2. Whether, on the facts and in the circumstances of the case, the assessee-firm could be held to have satisfied the conditions of section 80HHA(2)(iv) of the income tax Act, 1961, and in that view was entitled to relief u/s 80HHA?"

The short facts are that the assessee-firm owns a cold-storage plant and derives income from the said cold storage plant from the customers who keep goods in the cold storage for preservation. For the assessment year 1983-84, the assessee claimed deduction to the tune of Rs. 3,195 u/s 80HHA of the Act. The ITO disallowed the claim solely on the finding that at no point of time during the relevant previous year, the assessee had employed 10 or more persons in its plant and as such it did not fulfil the condition mentioned in clause (iv) of sub-section (2) of section 80HHA. The assessee filed an appeal and the appellate authority relying upon the decisions of the Karnataka and Bombay High Courts came to hold that it was not necessary for the assessee to establish that there should be 10 employees during the year and, therefore, the assessee has satisfied the requirement of clause (iv) of sub-section (2) of section 80HHA. Accordingly, the appeal was allowed and deduction as claimed was, thus, allowed. The department carried the matter in second appeal to the Tribunal. But the Tribunal in view of the decisions of the Bombay and Karnataka High Courts and confirming the finding of the appellate authority that the assessee had engaged 10 persons and thereby had satisfied the requirement of clause (iv) of sub-section (2) of section 80HHA, dismissed the appeal. Thereupon, an application having been filed u/s 256(1), the two questions, as stated earlier, have been formulated and referred to this Court.

2. Mr. Ray, the learned standing counsel for the department, contends that an assessee would be entitled to the deductions as contained in section 80HHA only when he fulfils all the four conditions enumerated in clauses (i) to (iv) of sub-section (2) of section 80HHA. Since the cold storage cannot be said to be an industrial undertaking engaged in the business of manufacturing or producing articles, clause (i) of sub-section (2) of section 80HHA is not satisfied and, therefore, even if the assessee had satisfied clause (iv) of sub-section (2), it is not entitled to the deduction in question. In support of his contention that the assessee's cold-storage cannot be said to be involved in manufacture or production of articles, the learned standing counsel places reliance on the recent decision of the Supreme Court in the case of Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others,

3. Mr. Agrawalla, appearing for the assessee, on the other hand, contends that the fact as to whether the three other pre-conditions contained in clauses (i) to (iii) are satisfied or not by the assessee, has never been considered by the ITO as well as by the two appellate forums. The only ground on which the ITO disallowed the claim is that the assessee did not satisfy clause (iv) of sub-section (2) of section 80HHA. Necessarily, therefore, it must be assumed that the Assessing Officer was satisfied that all other pre-conditions in clauses (i) to (iii) have been satisfied and since the appellate authority as well as the Tribunal has recorded the finding that 10 or more than 10 persons had been engaged, the ultimate conclusion allowing deduction is wholly justified and the answer to the questions must be in favour of the assessee and against the department.

4. In view of the riva