Hon’ble Devi Prasad Singh, J.—Instant appeal under Section 260 A of the Income Tax Act 1961 (in short hereinafter referred as the Act) has been preferred against the judgment and order dated 14.12.2003 passed by Income Tax Appellate Tribunal, Lucknow Bench, Lucknow (in short hereinafter referred as Tribunal) in income tax appeal for the assessment year 1991-92.

2. We have heard Shri D.D.Chopra, learned counsel for the appellant and Shri Sanjeev Shankhdhar, learned counsel for the respondents. Appeal was admitted by a Division Bench of this Court on the following substantial question of law :

“Whether the Learned Income tax appellate Tribunal was, in law, justified in holding that the assessee was eligible for deduction under Section 80-I of the Income Tax Act, 1961 from its profit in respect of its Majhola & Anoop Shahar Distilleries, even though the Industrial alcohol, it was manufacturing was covered by the list of articles or things prohibited under the Schedule XI of the Income Tax Act, 1961 and as such deduction under Section 801 was not available in view of provision of 801 (2) (iii) of the Income Tax Act, 1961.”

3. The aforesaid substantial question of law, on which the appeal was admitted, co-relate with the interpretation of Entry-1 of the Schedule 11 of the Act. Under Section 80-I of the Act deduction is permissible in respect of profits and gains from industrial undertaking after certain dates. While computing the total income of the assessee under Section 80-I of the Act deduction is permissible from the profits and gains to the extent of 20 percent thereof. Admittedly, the assessee was entitled for deduction subject to rider imposed by Sub-section 2 of Section 80 I. Clause 3 sub-section 2 of Section 80-I required condition which are to be fulfilled by the industry and one of them is contained in Clause 3 which provides that in case, industry manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce article or things or to operate such plant or plants, at any time within the period of 10 years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the official Gazette, specify with reference to any particular industrial undertaking.

4. Item 1 of Schedule 11 of the Act, for convenience is reproduced as under :

“1. Beer, wine and other alcoholic spirits.”

Whether industrial alcohol is covered by the word “other alcoholic spirit” is the question requires adjudication by this Court.

5. The assessee is the Co-operative society and also runs distilleries at Majhola (Pilibhit), Nanauta (Saharanpur) and Annop Sahar as well as possessed foreign liquor shops. Return of income was filed by the assessee on 31.10.1989 indicating loss of Rs. 1,4081830/-. The assessment was completed at an income of Rs. 52,62,255/-. The assessing authority allowed deduction under Section 80 1 amounting to Rs. 1,55,945/- and Rs. 12,82,628 with regard to Anoop Shahar and Nanauta Distilleries respectively from its profit. However, at later stage, assessing authority sought to withdrawn the deduction given under Section 80-1 and issued notices for rectification under Section 154 computing the total income of Rs. 67,64,600/-. It was claimed by the assessee that distilleries in question were producing industrial alcohol which is not fit for human consumption as wine or alcohol drugs without its further processing. It was further claimed that industrial alcohol is sold to synthetic Rubber and chemical factories as raw material besides to other distilleries for manufacture of wine and alcoholic drink after processing, hence, deduction under Section 80-1 was correctly claimed and allowed. The assessing officer had not accepted the contention and held that item 1 of Schedule 11 where beer, wine and other aloco