Per M.K. Chaturvedi, Vice President. - This appeal by the assessee is directed against the order of the CIT (Appeals) and relates to the assessment year 1996-97.

2. Shri S.P. Chidambaram, learned counsel for the assessee neatly identified the issues as under :

1.Whether in the facts and circumstances of the case assessee is entitled to claim deduction under sections 80HH and 80-I of the Income-tax Act, 1961 in respect of power generation?

2.Whether in the facts and circumstances of the case, assessee did comply with the conditions contained under sections 80HH and 80-I in relation to the employment of the requisite number of employees?

3.Whether in the facts and circumstances of the case the provision of section 80AB was properly appreciated in regard to the consideration of income generated during the previous year from the wind mill for quantifying the deduction under sections 80HH and 80-I of the Act?

3. We have heard the rival submissions in the light of material placed before us and precedents relied upon. Assessee claimed deduction under section 80HH on wind mill amounting to Rs. 3,44,284 and under section 80-I amounting to Rs. 4,30,355. It was fairly conceded by the learned counsel that so far as the claim under section 80-I is concerned, the issue is decided against him by the order of the Tribunal in the case of Sri Ramakrishna Mills (Cbe) Ltd. v. Dy. CIT [IT Appeal No. 84 (Mad.) of 1998]. We, therefore, proceed to decide the issue in the context of section 80HH only.

4. As per the mandate of the statute, deduction under section 80HH is available in respect of profits and gains from newly established industrial undertaking or hotel business in backward areas. For enabling the benefit of the section, income must be derived from an industrial undertaking. Now the question arises whether the business of generation or distribution of power could be construed to be ‘industrial undertaking’ for the purpose of section 80HH. To examine this aspect it is sine qua non to discuss the entire scheme apropos the deduction contemplated in the said section.

5. As per the prescription of section 80HH(2)(i) it is necessary for an industrial undertaking to be eligible for deduction if it has begun or begins to manufacture or produce articles after the 31st day of December, 1970 but before the 1st day of April, 1990, in any backward area. Manufacturing and production of article is, therefore, made a requisite condition for enabling the benefit of the section. The word "production" or "produce" when used in juxtaposition with the word "manufacture", takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. The next word to be considered is "articles" occurring in the said clause. This word is not defined in the Act. It must, therefore, be understood in its normal connotation - the sense in which it is understood in the commercial world. It is equally well to keep in mind the context, since a word takes its colour from its context. The word "articles" is preceded by the words "it has begun or begins to manufacture or produce". Can we say that the word "articles" in the said clause comprehends and takes in its ambit power generation? We find it difficult to say so. Would any person who is engaged in the business of generation of power say that he has manufactured an article or that he has produced an article? Obviously not. To say that power generation falls within the meaning of the word "article" is to over-strain the language beyond its normal and ordinary meaning. The expression "manufacture" and "produce" are normally associated with movables - articles or goods, big and small - but they are never employed to denote the activity of the generation of power. In the shorter Oxford Dictionary the word ‘article’, is defined as "a commodity; a piece of goods or property"