This is appeal filed by Sri Balaji Metal Finishers, Secunderabad against order of Commissioner Hyderabad, for assessment year 1979-80. 2. assessee is company incorporated for job works for electroplating. assessee claimed investment allowance and was allowed same at 25 per cent on outlay of Rs. 1,43,593 working out to Rs. 35,898. assessee had made reserve as required and ITO allowed investment allowance as claimed. Since assessee had only loose investment allowance was indicated in assessment order as amount which would be carried forward. Commissioner noticed assessment. He was of view that activity o f electroplating cannot be treated as manufacture and that, therefore, investment allowance was wrongly allowed. He issued notice to show cause why investment allowance should not be withdrawn acting under section 263 of Income-tax Act, 1961 ('the Act'). assessee replied with reference to case law that assessee's activity constituted manufacture. assessee's arguments were found unaccountable inasmuch as Commissioner found that electroplating was akin to galvanising and that galvanising was not treated as manufacture in decision of Calcutta High Court in CIT v. Hindusthan Metal Refining Works (P.) Ltd. [1981] 128 ITR 472. Relying upon this decision, he directed ITO to withdraw investment allowance. assessee is, therefore, in appeal against said order. 3. learned representative for assessee took us over accounts of assessee and described its activities. He claimed that Assessee has used machinery which was purchased at cost of nearly Rs. 1.5 lakhs for electroplating various industrial and other items like parts for fan equipment, scooter, refrigerators and rickshaws besides electroplating safety pins, hair pins, nuts, bolts, screws and washers, etc. He also pointed out that assessee purchased various raw materials which included metals, acids, chemicals, oils, emery wheel, etc. Though assessee was doing job works for others, there was considerable outlay of materials and that cost of such materials and direct expenses like direct wages amounted to 67.56 per cent of total receipts. This, according to him, indicated extent of materials used. He referred to definitions under sales tax law and Factories Act, 1948, to support his claim that even mere ornamentation coating may involve manufacture. He also sought to buttress his case by technical opinion from Andhra Pradesh Industrial & Technical Consultancy Organisation Ltd., subsidiary of Industrial Development Bank of India to effect that assessee's activity would constitute manufacture. This report also sought to distinguish electroplating process from galvanising process. With aid of this report and other technical details, learned representative sought to impress upon us that electroplating involved various complex processes and has to be treated as manufacturing process. He cited number of authorities of various High Courts and Tribunal. In fact, he has filed detailed los of them with propositions which he wants to canvass with reference to this decisions. 4. learned departmental representative, on other hand, claimed that technical opinion as with reference to Factories Act which naturally seeks to give extended meaning to word 'manufacture' so to bring within its scope larger number of establishments. In fact, Madras High Court in case of CIT v. Buhari sons (P.) Ltd. [1983] 144 ITR 12 had pointed out that definitions under Factories Act would not be applicable where issue involved is whether assessee is industrial company or not. Hence, position cannot be different for purposes of investment allowance. He, therefore, contended that this could not be basis of any conclusion. If it is argued that electroplating is complex process, he contended that so was galvanising. In one coating was with zinc while in other it could be with any other metal. Zinc is used for anti-corrosion while other metals are used for shining or for some other such purposes. product in either case continued to be same. He, therefore, argued that it will not be open to us to ignore decision of Calcutta High Court which is nearest to assessee's facts. He also sought to justify order of Commissioner on basis of another argument. He pointed out that basic material never belonged to assessee. Its entire receipts are by way of service charges. He claimed that this distinction was noticed by Bombay Tribunal in case of ITO v. Ahura Shipping & Engg. Co. (P.) Ltd. [1984] 8 ITD 435 wherein this Tribunal, according to him, excluded job works from purview of 'investment allowance'. In this connection, he referred to following passage from above decision: "... short question that arises for consideration, therefore, is whether or not assessee-company manufactures of produces articles or things, there being no suggestion that assessee is engaged in business of construction. This has to be examined on facts of case, viz., that assessee is mainly engaged in carrying out large scale repairs to ships though job undertaken include manufacture or fabrication of parts, components and other equipments necessary for undertaking large scale repairs. In other words, just because assessee, for and in course of undertaking large scale repairs of ships, has to do fabrication and manufacture of certain items, it can be held that assessee manufactures or produces articles or things. If we were to decide this issue on basis of first principle, we would have straightaway held that assessee does not manufacture or produce any article or thing, as, according to us, when person manufactures or produces article or thing, it is implied that such articles or things are manufactured or produced for purpose of sale and not for purpose of some job work." (p. 439) He contended that if assessee's arguments were to be accepted, persons who manufactured products would be denied benefit of investment allowance while assessee to whom goods did not belong would be allowed this deduction. This, according to him, would lead to anomalous result. 5. learned counsel for assessee, in reply, questioned argument of learned departmental representative that there is any anomaly involved concession to persons who virtually employs manufacturing process by help of machinery, labour and his own skill so as to produce commercially different article. He pointed out to decision of Madras High Court in case of CWT v. K. Lakshmi [1983] 142 ITR 656 which has laid down that requirement is direct involvement in manufacture. assessee should employ his own labourers. If manufacture is done by outside agency, such assessee cannot claim to be industrial undertaking for purpose of Wealth-tax Act, 1957. He, therefore, contended that it could well be that assessee is entitled to investment allowance and not persons for whose benefit he did job work. As for his reliance under Factors Act and sales tax decisions, he contended that it is not his case that those decisions will automatically apply for income-tax purposes. But there is no reason why they should be brushed aside as being of no relevance. decision of Madras High Court relied upon by learned departmental representative did not dismiss claim based upon decisions on Factories Act as totally inapplicable but distinguished them for purpose of income-tax law. He contended that learned departmental representative did not make any such distinction besides merely brushing aside those decisions. As for argument that assessee has to do manufacturing on its own account, he claimed that this argument besides not having been raised in order of Commissioner is also weak. remark made by this Tribunal in case relied upon by learned departmental representative was in context of repairer. There is no doubt that assessee should be in business of manufacturing goods. If he is not in that business, there cannot be any further question as to eligibility of investment allowance. He pointed out to Special Bench decision of Madras Tribunal in case of Thiagaraja Industries v. ITO [1983] 3 SOT 505 wherein this issue was specially considered. He also referred to some decisions of this Tribunal where such allowances have been granted to persons who did not own goods themselves. 6. We have carefully considered records as well as arguments. Both of us had occasion to consider what constitutes 'manufacture' in case of Durandel Foods (P.) Ltd. v. ITO [1983] 6ITD 207 (Hyd.) where we had observed as under: "Fortunately, considerable guidance is available as to what constitutes manufacture. statute itself does not define 'manufacture'. Courts have pointed out that word 'manufacture' has various shades of meaning and ordinarily involves application of some labour resulting in final product which is commercially different from article to which labour was applied. article is said to be commercially different if it has 'distinct character, name and use after process to which it is subjected'. Sometimes, article may remain same, but it is commercially different, as for example, printed or dyed cloth from cloth before it was printed or dyed. If new form or quality is given to per- existing article on application of had labour or machinery, it may well amount to existing article on application of had labour or machinery, it may well amount to manufacture. mere assembling of various parts to form whole may constitute manufacture. Sometimes, different quality may be ensured by mere process of goods. But, processing does not always mean that there is manufacture. While manufacture involves processing, processing by itself may not tantamount to manufacture. These are propositions emerge in number of decisions of Courts in matters of sales tax, central excise and income-tax law. We do not, therefore, consider it necessary to cite all decisions cited by either party as to general principles as there is really no dispute on these matters. It is agreed that mere processing cannot help taxpayer to get investment allowance though it may be enough for some other reliefs under statute. 8. last of cases dealing with definition of 'manufacture' was under Transfer of Property Act, 1882 in case of Idandas v. Anant Ramchandra Phadke AIR 1982 SC 127 where Supreme Court mentioned three tests as to what constitutes manufacture while holding that running flour mill was used for manufacturing process under section 106 of Transfer of Property Act, 1882. three tests were (i) certain commodity should have been produced; (ii) process of production must involve either labour or machinery; and (iii) end product should have distinct character, name and use. It quoted with approval decision of Calcutta High Court which pointed out that even manufactured commodity may constitute material for working it up into different product, as for example, both tanner and shoemaker could be manufacturers though material processed is one and same. Supreme Court also referred to definition in Shorter Oxford English Dictionary laying stress on deployment of 'physical labour or mechanical power'." (p. 211) As pointed out therein, though principles as to what constitutes 'manufacture' is now well settled, there could still be dispute for application of these principles. assessee is engaged in business. sole activity constituting such business is electroplating services. It has installed expensive machinery and has skilled labour. only dispute is whether product which is electroplated by assessee could be considered as commercially different from one before electroplating. assessee has electroplated various items of industrial and trade articles. It has electroplated spare parts for fan equipment, refrigerators, rickshaws, scooters, etc. No doubt, it has also electroplated items like safety pins, hair pins, etc. Electroplating is not mere polishing or giving shine. Technical opinion irrespective of its conclusion has clearly pointed out that it involves various stages like degreasing, pickeling, polishing, cleaning, electro- degreasing, under-coating, electroplating and post-treatment with transparent plastic materials. It may be that galvanising is also complex process to larger or lesser degree. But galvanising is more anticorrosion step to protect metal while electroplating is done not only for avoiding corrosion but also for improving qualities like hardness, bearing, chemical resistance and adding qualities of metal which is used in coating. While galvanisation is done with zinc, electroplating can be done with any metal though it is ordinarily done with copper, nickel, chromium, tin or even silver, or with combination of these metals. However, real test is whether commercially different article would emerge as result of electroplating. Calcutta High Court in case of Hindusthan Metal Refining Works (P.) Ltd. (supra) based on its decision that galvanisation did not involve manufacturing process only because it found that there was no transformation of article. It was treated as only process to protect product from rust. High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) observed as under: "The expressions 'manufacture' or 'produce' are well-known expressions in fiscal legislation. expression 'manufacture' is expression very often considered in cases dealing with Central Excise and sales tax matters. It has been held that production or manufacture of goods involve bringing into existence new goods or articles known as such goods and articles in market." (p. 474) It concluded that assessee was not entitled to be treated as industrial undertaking on following factual finding in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra): "... Galvanisation is act or process of galvanising or coating to protect it from rust. This does not bring into existence different article or article commonly known to people differently who deal with it before it was galvanised ...." (p. 476) It is assessee's case that none of articles which are electroplated could be treated to be commercially same product as before electroplating. Many of articles like refrigerator handles, hair pins, etc., are not sold in market before electroplating. As for industrial goods, such as scooter spare parts, electroplating is essential process before they could be used as spare parts. He contended that these products cannot and are not sold in form in which they were manufactured. assessee had also produced number of items which were electroplated by it and showed specimens before and after electroplating. We do find that articles before electroplating could not, and to best of our information, are not being sold and used for purpose for which they are intended. If it were so, it naturally follows that electroplating is process which transforms materials which were given to assessee for electroplating into something which is commercially different. As noted earlier, electroplating is more elaborate process and it has varied uses. items which are electroplated by assessee are such as that they are not sold prior to electroplating. It is in this context, we must hold that settled principles should apply to assessee's case in its favour. We have found that decision of Calcutta High Court relied upon by learned Commissioner is easily distinguishable for reasons stated hereinbefore. learned representative has cited number of decisions. We do not consider it necessary to deal with all or some of them because manufacture of each item involves different products and issue as to whether commercially different commodity had resulted could be matter of argument in each case. In case of CST v. Radha Dyeing & Printing Mills [1981] 48 STC 61, it was held that process of dyeing and printing would constitute manufacture for sales tax purposes. In Hiralal Jeetmal v. CST [1957] 8 STC 325 (MP), it was observed that it is not necessary that there should be complete transformation of materials so as to constitute manufacture. This decision was followed by Bangalore Special Bench in respect of investment allowance on X-Ray plant in case of First ITO v. Dr. P. Vittal Bhat [1983] 6 ITD 560. Ahmedabad Tribunal in case of Nishit Synthetics (P.) Ltd. v. ITO [1984] 7 ITD 486 held that conversion of flat yarn into twisted yarn is manufacture on same reasoning as adopted in this case. There is also other decision where conversion of plain cloth into saree with printing was treated as manufacture in decision of Bombay Bench of this Tribunal at p. 22 of April 1982 issue of Taxes and Planning. single product may require more than one manufacturer before it goes to consumer. It is not necessary that there should be one manufacturer for one article. As long as there is transformation at each stage, which makes article commercially different from earlier state, there is manufacture. Madras High Court in case of CIT v. Perfect Liners [1983] 142 ITR 654 was of view that word 'manufacture' in context of development rebate has to be understood in wide sense. Where all that taxpayer was doing was polishing rough castings so that such polished rough castings could be utilised for internal combustion engines, he could be treated as person engaged in manufacture. Reasoning again was that polishing was equivalent to manufacture because resultant product was different. In coming to his conclusion, High Court followed its earlier decision in CIT v. M. R. Gopal [1965] 58 ITR 598 (Mad.). Rationale of these two decisions is that where labour and machinery are used for converting one product into commercially different one, there was manufacture. This Tribunal in case of Durandel Foods (P.) Ltd. (supra) considered even packing process as constituting manufacture in facts and circumstances of case because bulk product before packing was not commercially sold while packing involved complex process with aid of machinery and labour. On basis of our finding that electroplating involved transformation of product before electroplating into commercially different one, we muse hold that assessee's claim on merits is justified and was, therefore, rightly allowed by ITO. 7. We have yet to deal with another argument which was raised by learned departmental representative during hearing. No doubt, Bombay Bench of this Tribunal in case of Ahura Shipping & Engg. Co. (P.) Ltd. (supra) had observed that job works may not qualify for treatment as manufacture. But that observation was made in context of repair works. In case of repair, question of manufacturing any new article does not arise. By very nature of business, it has to be job work and job work alone. Hence, question whether it was done on own account or on somebody else's account was not issue that could have arisen in that case. Actually, this issue w s squarely considered by Special Bench in case of Thiagaraja Industries (supra). Special Bench pointed out that requirement that assessee should own raw materials is novel one and is not contemplated by statute. While law is clear that machinery should be owned by assessee, there is no requirement that raw materials used in manufacture should also be owned by assessee. In coming to this decision, Special Bench followed order of Tribunal in earlier case referred to therein. Again, question whether manufacturer on his own account should get deduction or whether person who does job work should get it is also not quite relevant. Only person who owns machinery and uses it for his business would get deduction. Even as pointed out in immediately preceding paragraph, it is possible that more than one person would get benefit of deduction if two or more such persons contribute to manufacture of product with their own machinery, labour and organisation independently transforming product at each stage into commercially different one. Madras Tribunal in case of First Leasing Co. of India Ltd. v. ITO [1983] 3 ITD 808 had pointed out that entire scheme of investment allowance has been spelt out in section 32A of Act and that only requirements are (i) that machinery must be owned by assessee; (ii) it must be used for assessee's business, and (iii) it must be one which is specified under section 32A (2), i.e., it must be used for manufacture or production of any article or thing. It is clear that all three conditions are satisfied in this case when once we have found that after electroplating, commercially different article emerges. Since investment allowance is in relation to machinery it has hardly anything to do with ownership of raw materials involved in article. learned departmental representative tried to say that it is difficult to envisage person who does merely job work as manufacturer. assessee's unit is registered as factory under Factories Act. It is registered as small-scale unit in department of industries as is evident from registration certificate dated 13-2-1979 photostat copy of which has been filed. Against column 'manufacturing or processing activity', it has been indicated that assessee's activity is 'job works in electroplating'. It has also been stated that date of commencement of production is '1-11-1978'. We do find that both sales tax and central excise law would consider that person owning machinery and using labour for manufacturing process would be considered as manufacture. Section 2(f) of Central Excises and Salt Act, 1944, defines 'manufacture' and 'manufacturer' as under: "(f) 'manufacture' includes any process incidental or ancillary to completion of manufactured product; and (i) in relation to tobacco includes preparations of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; (ia) in relation to manufactured tobacco includes labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render product marketable to consumer; (ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling or any one or more of these processes, separation or purification or salt obtained in manufacture or saltpetre, separation of salt from earth or other substance so as to produce elementary salt, and excavation or removal of natural saline deposits or efflorescence; (iii) in relation to patent or proprietary medicines as defined in Item No. 14E of First Schedule and in relation to cosmetics and toilet preparations as defined in Item No. 14F of that Schedule, includes conversions of powder into tablets or capsules, labelling or relabelling of containers intended for consumers and repacking from bulk packs to retail packs or adoption of any other treatment to render product marketable to consumer; (iv) in relation to goods comprised in Item No. 18A of First Schedule, includes sizing, beaming, warping, wrapping, winding or reeling, or any one or more of these processes, or conversion of any form of said goods into another form of such goods; (v) in relation to goods comprised in Item No. 19-I of First Schedule, includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any one or more of shrink-proofing, organdie processing or any other process or any one or more of these processes; (vi) in relation to goods comprised in Item No. 21(1) of First Schedule, includes milling, raising, blowing, tendering, dyeing or any other process or any one or more of these processes; (vii) in relation to goods comprised in Item No. 22(1) of First Schedule, includes, bleaching, dyeing printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any one or more of these process; and (viii) in relation to aluminium, includes lacquering or printing or both of plain containers; and word 'manufacturer' shall be construed accordingly and shall include not only person who employs hired labour in production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;" By above definition, process employed by assessee would be manufacture and assessee would be manufacturer. In fact, it has been held by Allahabad High Court in Gangadhar Ramdhandas v. Collector of Central Excise 1979 ELT (J) 597 and Andhra Pradesh High Court in Andhra Re-Rolling Works v. Union of India 1979 ELT (J) 600 that person who carries on manufacturing activity and not person who supplied raw materials to t h e person who will be liable for excise duty as manufacturer. But as pointed out by learned departmental representative, definition under Factories Act or other Acts cannot be automatically imported because what is required is that popular and generally understood meaning of word should be considered and not special meaning given in special statute. We are, however, citing provisions of central excise law and decisions thereunder to show that concept of manufacturer under Central Excise Art, primarily includes person who employs hired labour in production or manufacture of excisable goods and only on extended meaning, person who manufactures 'on his own account' is sought to be included. In other words, person on whose behalf manufacturing is done, may also be treated as manufacturer by extended meaning given to word 'manufacturer' under central excise law. ordinary meaning of manufacturer refers to person who does actual manufacture whether he does it on his own account or on somebody else's account. We are of view that general meaning assigned to manufacturer does not require that manufacturing should be done by that person on his own account even as held by Special Bench. case before Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra), decision relied upon kly by Commissioner and learned departmental representative for their arguments by comparing galvanising to electroplating, was also case of job work inasmuch as galvanising work was done 'for outsiders'. But decision did non turn on this fact but on fact that galvanising did not bring out commercially different product. In case of Durandel Foods (P.) Ltd. (supra), this Tribunal was again dealing with case of packing done or some other person's goods. Hence, we do not think point now sought to be made out by learned departmental representative would justify order of commissioner. 8. In any view of matter, assessee's appeal deserves to succeed. order of Commissioner is set aside and that of ITO is restored. 9. appeal is allowed. Per Shri T. V. Rajagopala Rao, Judicial Member-In this case, I have read t h e order proposed by my learned brother, Shri S. Rajaratnam, Accountant Member. I am unable to agree with him in his conclusions. Firstly, this Tribunal Bench 'B' by its order passed in Deepak Galvanising & Engg. Industries v. ITO [IT Appeal Nos. 1015 and 1063 (Hyd.) of 1982, dated 18-6-1983] took view that galvanising did not involve manufacture or production of any article and assessee engaged in galvanising was not industrial undertaking. Here, in this case, no doubt, argument was advanced on behalf of assessee-company that process of galvanising is different from electroplating. According to my learned brother, galvanising is more anti-corrosive step to protect metal, whereas electroplating is done not only for avoiding corrosion but also for improving qualities like hardness, chemical resistance and adding qualities of metal which is used in coating. Whereas galvanising is done with zinc, electroplating can be done with any metal though it is ordinarily done with copper, nickel, chromium, tin or even silver or with combination of these metals. According to my learned brother, thing upon which electroplating was done was commercially different product than thing in its original shape. I am unable to agree with this conclusion. For instance, if nuts, bolts and hair pins were electroplated, they remain as they are and they go only by name of nuts, bolts and hair pin. So also ceiling fan bottom cup, 48" fan guard's outer rings, refrigeration handle, rickshaw parts, gas stove frames, kickstarter pedal, carriers rush guards bear their names before they are electroplated and they are being used as subsidiary parts in certain machines gadgets in which they are used. Take, for instance, kick pedal. If pedal is made with iron or steel or if it is electroplated use to which it is put is only as pedal. It is different thing to say that pedal looks nice, lasts longer, etc., if it is electroplated. But to say that after particular part in gadget is being electroplated, it becomes separate identifiable product and is quite different from its original existence or identity does not appear to me to be correct. Further, opinion of Andhra Pradesh Industrial Technical Consultancy Organisation Ltd. is filed to show that 'manufacturing process' includes 'ornamenting'. However, definition of manufacturing process was taken from provisions of Factories Act. learned departmental representative before us cited decision of Madras High Court in Buhari Sons (P.) Ltd.'s case (supra) on basis of which he argued that definitions under factories Act would not be applicable where issue involved is whether assessee is industrial company or not. I am unable to find any good ground on which this decision of Madras High Court i s distinguished, in order of my learned brother. Further in technical opinion report furnished from p. 12 to 16 of paper compilation meaning given to galvanising process was stated to have been extracted from Encyclopedia Vol. 3, Eighth Chapter (Metals and Ores), p. 303 covering metals and their technology, whereas, while descrying process of electroplating no such authority was quoted. Therefore, I am not able to understand whether process of electroplating given in technical opinion report is backed by any such authority as was given while describing process of galvanising. 2. Further, while granting certificate and recognising assessee is small-scale industry by department of industries, assessee is stated to be purely engaged in 'job works in electroplating'. So there is no denying fact that assessee is engaged in only job works for others. It does not manufacture is own products and it won't sell any products manufactured by it in open market. In my understanding, assessee company sells its services of electroplating. It is no doubt true that in process, for instance, it was in receipt of Rs. 88,470.91 for which it had to incur direct expenses and prime cost of metals consumed for electroplating at Rs. 59,774.56 which works out to 67.56 per cent. However, above figures do not alter fundamental character of business carried on by assessee. fundamental character of business of assessee is that goods manufactured by it are not directly sold in market. One of Tribunal decisions on which reliance is placed by learned departmental representative was decision in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) wherein head-note of decision it is held as follows: "When person manufactures or produces article or thing, it is implied that such articles or things are manufactured or produced for purpose of sale and not for some job work. In instant case, assessee was mainly engaged in carrying out repairs to ships, though job under taken included manufacture or fabrication of parts, components and other equipment necessary for undertaking such repairs. Merely because assessee had to, for and in course of undertaking repairs of ships, fabricate and manufacture certain items, it could not be held that assessee manufactured or produced articles or things. On basis of first principle, therefore, assessee could not be said to manufacture or produce any article or thing." (p. 436) In my understanding of abovesaid order, it lays down principle that if person manufactures or produces articles or things in execution of his job work, then he should not be taken to be manufacturer or producer of said articles or things. At paragraph No. 7 of my learned brother's order, decision of Bombay Tribunal referred to above was sought to be distinguished. I am not able to make out how it was successfully distinguished. Without saying that it went against Special Bench decision in Thiagaraja Industries' case (supra) my learned brother appeared to have derived support from Special Bench my learned brother appeared to have derived support from Special Bench decision in Thiagaraja Industries' case (supra) rather than from Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra). Whatever that may be said, decision in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) in my opinion, directly covers facts of present case and so following said decision, in my opinion, relief of investment allowance under section 32A should have been denied to assessee. However, my learned brother allowed appeal and also conceded investment allowance to assessee. For abovesaid reasons, I am unable to accept his order. In my opinion, according to abovesaid reasoning of mine investment allowance sought for by assessee-company should have been disallowed and according to me appeal should have been dismissed instead of being allowed. REFERENCE UNDER SECTION 254(4) OF INCOME-TAX ACT, 1961 Since, there was difference of opinion of following point between Members who heard appeal, we refer point to President through Vice President for hearing by Third Member: "Whether, on facts and in circumstances of case, assessee whose business is doing job works in electroplating is entitled to its claim of investment allowance of Rs. 35,898 on its investment on machinery at Rs. 1,43,593?" THIRD MEMBER ORDER Per Shri M. R. Sikka, Vice President - There being difference of opinion between learned Members of Tribunal, Hyderabad, following question has been referred to me for resolving controversy: "Whether, on facts and in circumstances of case, assessee whose business is doing job works in electroplating is entitled to its claim of investment allowance of Rs. 35,898 on its investment on machinery at Rs. 1,43,593?" 2. assessee-company carries on business in electroplating and undertakes job works for others. For assessment year 1979-80, ITO allowed claim of assessee for investment allowance amounting to Rs. 35,898 under section 32A. Subsequently, Commissioner was of view that assessee did not carry on business of 'manufacture' of articles within meaning of section 32A (2) (b) (iii). He observed that process of 'manufacture' involved some transformation or change in material as result of application of art or mechanical manipulation. He referred to decision of Supreme Court in case of Dy. CST v. Pio Food Packers [1980] 46 STC 63. According to this authority, test that was required to be applied was whether processing of original commodity brings into existence commercially different and distinct article; if it does, it is process of manufacture, otherwise it does not amount to manufacture. Commissioner then observed that there were numerous decisions in favour of and against contention of assessee company that process carried on by it amounted to manufacture. He, however, considered decision of Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.' case (supra) as most relevant to present case. According to this decision of Calcutta High Court, 'galvanising' was not process of manufacture and did not result in manufacture of new goods. Commissioner remarked that galvanising involved process of coating iron or steel with zinc to protect material from rust, that electroplating also involved process of coating one material with another by electric treatment and, hence, these processes were similar in character. He, therefore, held that order of ITO allowing claim of assessee for investment allowance under section 32A was erroneous and prejudicial to interests of revenue. He, accordingly, set aside assessment under section 263 of Act and directed ITO to withdraw investment allowance already allowed to assessee. 3. Aggrieved by order of Commissioner assessee went in appeal before Tribunal. After hearing parties, learned Members of Tribunal could not come to agreed conclusion. 4.1 learned Accountant Member accepted contention of assessee-company that it was engaged in business of 'manufacture' of articles within meaning of section 32A (2) (b) (iii). He observed that articles within meaning of section 32A (2) (b) (iii). He observed that 'electroplating', according to technical opinions, involves various stages like degreasing, pickeling, polishing, cleaning, electro-degreasing, undercoating and treatment with transparent plastic materials. According to him, galvanising was more anti-corrosive step to protect material whereas electroplating was done not only for avoiding corrosion but also for improving qualities like hardness-bearing, and chemical resistance, etc. Further, while galvanizing was done with zinc, electroplating could be done with any metal though it was ordinarily done with copper, nickel, chromium, tin or even silver or with combination of these metals. Thus, according to learned Accountant Member, process of galvanising and electroplating were different and so, decision of Calcutta High Court in case of Hindusthan Metal Refining Works (P.) Ltd. (supra) did not clinch issue in present case. He further observed that real test was whether commercially different article would emerge as result of electroplating. On this point, he remarked that many of articles like refrigerator handles and hair pins, etc., were not sold in market without electroplating, that for certain industrial goods like scooter spare parts, electroplating was essential process before they could be used as spare parts and that articles which are electroplated could not and were not sold in form in which they were originally manufactured. learned Accountant Member, therefore, concluded that electroplating was process which transformed materials into certain articles which were commercially different and, hence, assessee was engaged in 'manufacture' of articles as contemplated by Supreme Court in Idandas v. Anant Ramchandra Phadke AIR 1982 SC 127 and as held by Tribunal in Durandel Foods (P.) Ltd.'s case (supra). In support of his conclusion, he also relied upon authorities in Radha Dyeing & Printing Mills case (supra), Hiralal Jeetmal's (supra), Dr. P. Vittal Bhat's case (supra) and Nishit Synthetics (P.) Ltd.'s case (supra). Referring to decision of Madras High Court in Perfect Liners' case (supra) and M. R. Gopal's case (supra), he remarked that word 'manufacture' should be understood in wide sense and so where labour and machinery were used for converting one product into commercially different one, there was 'manufacture'. 4.2. Another argument of learned departmental representative before Bench was that since assessee-company was engaged in job works, it did not qualify for being treated as manufacturer. In this behalf, he relied upon decision of Tribunal in case of Ahura Shipping & Engg. Co. (P.) Ltd. (supra). learned Accountant Member rejected this argument. Referring to decision of Special Bench of Tribunal in Thiagaraja Industries' case (supra) he observed that, for claiming investment allowance, law simply requires that machinery should be owned by assessee; it was not necessary that raw materials used in manufacture should also be owned by assessee. He further referred to decision of Tribunal in case of First Leasing Co. of India Ltd. (supra) according to which only requirements for claiming investment allowance under section 32A were that (i) machinery should be owned by assessee, (ii) it must be used for assessee's business, and (iii) it must be used for manufacture of articles specified in section 32A (2). According to learned Accountant Member, all these conditions were satisfied in present case. He also took note of definition of 'manufacturer' in section 2(f). According to this definition, word 'manufacturer' included not only person who employed hired labour in production or manufacture of excisable goods, but also any person who engages himself in their production or manufacture on his own account. learned Accountant Member observed that concept of 'manufacturer' under Central Excise Act primarily include person who employs hired labour in production or manufacture of excisable goods and it is only on extended meaning that person who manufactures 'on his own account' is sought to be included in definition of 'manufacture'. Thus, according to him, ordinary meaning of 'manufacturer' would refer to person who does actual manufacturing whether he does it on his own account or on somebody else's account. He rejected argument of department that definition given in Central Excise Act or Factories Act could not be considered even 'relevant' for purpose of deciding point at issue. 4.3 Accordingly, learned Accountant Member was of opinion that assessee-company was entitled to investment allowance under section 32A. 5. learned Judicial Member did not agree with learned Accountant Member. He referred to decision of Tribunal in case of Deepak Member. He referred to decision of Tribunal in case of Deepak Galvanising & Engg. Industries (supra), wherein it was held that business of galvanising did not involve manufacture or production of any article. He was of view that process of galvanising was not different from electroplating and, as such aforesaid decision applied to present case. He further observed that nuts, bolts and hair pins, refrigeration handles, rickshaw parts, gas stove frames and other articles remained same even after electroplating and, as such, it could not be said that new and commercially different and distinct articles would come into existence after electroplating so as to accept proposition that electroplating was manufacturing process. He referred to decision of Madras High Court in case of Buhari Sons (P.) Ltd. (supra) and observed that definitions of various expressions under Factories Act or Central Excise Act would not be applicable where issue involved was whether assessee was industrial company or not. learned Judicial Member was further of view that assessee-company was engaged only in 'job works in electroplating' for others, that it did not manufacture and sell its own products and, as such, it was not entitled to investment allowance. According to him, fact that direct expenses and prime cost of metals consumed for electroplating amounted to Rs. 59,774 and constituted 67.56 per cent of its receipts amounting to Rs. 88,470 did not alter fundamental character of business carried on by it. He relied upon in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) and held that if person manufactured or produced articles or things in execution of his job work, then he could not be considered as manufacturer or producer of said articles or things. According to him, decision of Special Bench of Tribunal in Thiagaraja Industries' case (supra) did not overrule decision of Tribunal in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra). He, therefore, concluded that assessee- company was not entitled to investment allowance under section 32A. 6. It is against this background that point at issue has been referred to me for decision as Third Member. 7. Before me, learned representative of assessee reiterated reasons advanced by learned Accountant Member to substantiate his case. Similarly, learned representative of department relied upon reasoning of learned Judicial Member in support of his point of view. It will be unnecessary to repeat their arguments in details. Suffice it to say that orders of learned Accountant Member and learned Judicial Member aptly summarize respective cases of parties. 8. After going through record and hearing learned representatives of parties, I am inclined to agree with learned Accountant Member. 9. crucial question for consideration is whether assessee-firm who undertakes job works in electroplating is entitled to investment allowance under section 32A (1). According to section 32A (2) (b) (iii), industrial undertaking will be entitled to investment allowance under section 32A (1) if new machinery or plant is installed after 31-3-1976 for purpose of business of construction, manufacture or production of article or thing not being article or thing specified in list in Eleventh Schedule of Act. main point of difference between parties hinges on question whether electroplating tantamounts to 'manufacture' or 'production' of article or thing within meaning of section 32A (2). Now, expressions 'manufacture' and 'production' have not been defined anywhere in Act. So, for solving problem, we have to seek aid of other authorities. 10 (i) Black's Law Dictionary defines 'manufacture' as follows: "The process or operation of making goods or any material produced by hand, by machinery or by other agency; ... production of articles for use from r w or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine." (ii) According to Webster's Dictionary, 'manufacture' means: "(a) to make or fashion by hand or machinery, (b) to work into useful form, (c) to produce in mechanical way, (d) to produce goods by hand or by industrial art or processes, etc." (iii) expression 'production' is defined by aforesaid dictionaries as (a) act or process of producing, and (b) any tangible result of industrial, artistic or literary labour. artistic or literary labour. (iv) According to decision of Supreme Court in Idandas's case (supra) there are three tests for determining whether particular process amounts to 'manufacture'. They are: (a) certain commodity should have been produced, (b) process of production must involve either labour or machinery, and (c) end product should have distance name character or use. (v) In Joyanti Hosiery Mills v. Upendra Chandra Das AIR 1946 Cal. 317, Supreme Court observed as under: "... To manufacture, according to its Dictionary meaning, means to 'work up materials into forms suitable for use'. word 'material' does not necessarily mean original raw material, for finished article may have to go through several manufacturing processes before it is fit and made ready for market. What is itself manufactured commodity may constitute 'material' for working it up into different product ...." (p. 318) (vi) Kerala High Court in case of CIT v. Casino (P.) Ltd. [1973] 91 ITR 289 has held as follows: "The term 'manufacture or processing of goods' has not been defined by Finance Act, 1968. In its ordinary meaning 'manufacture' is process which results in alteration or change in goods which are subjected to such manufacture. commercially new article is produced. production may be by manual force, mechanical force or even by nature's own process such as drying by heat of sun as in salt pan. real test is to see whether commodity which in commercial sense is different from raw materials has resulted due to manufacture ..." (p. 289) (vii) Then, Bombay High Court has brought out distinction between wider and narrower connotation of word 'manufacture' in case of CIT v. Tata Locomotive & Engg. Co. Ltd. [1968] 68 ITR 325. This authority lays down as follows: "The word 'manufacture' has wider and also narrower connotation. In wider sense it simply means to make, or fabricate or bring into existence article or product either by physical labour or by power, and word 'manufacturer' in ordinary parlance would mean person who makes, fabricates or brings into existence product or article by physical labour or power. other shade of meaning, which is narrower meaning, implies transforming raw materials into commercial commodity or finished product which has entity by itself, but this does not necessarily mean that materials with which commodity is so manufactured must lose their identity. Thus, both words 'manufacture' and 'produce' apply to bringing into existence of something which is different from its components ..." (p. 325) 11. Let us now examine, in light of aforesaid authorities, whether electroplating falls within definition of 'manufacture' or 'production' of articles. Before determining that issue, we may first understand process of electroplating. As explained by counsel for assessee, this process comprises following stages: Degreasing Removal of oils, grease and other surface contamination to make it suitable for pickling involving alkaline chemicals. Pickeling Process for chemical treatment where various metals are treated with different acidic solutions to remove metallic salts (example:iron is treated to remove rust). Polishing mechanical process also called buffing by which metal is made soft at surface to attain better final finish. Cleaning Process to remove oils left during polishing. Electro-degreasing Process for removing oils and grease left in cleaning by using current. Under-coating Electro-deposition of metal cheaper than one being finally deposited for better conductivity for final plating process. Electroplating Electro-deposition of required metal by way of electrolysis. Post-treatment process of coating finished product with films of transparent plastic to protect it. 12. It is evident that electroplating involves various processes, namely degreasing, pickeling, polishing, cleaning, electro-decreasing, undercoating, electroplating and post-treatment, etc. crucial question for consideration is whether article, after electroplating, retains its old shape or undergoes transformation. It is common knowledge that article, before electroplating, is nearly junk whereas it is entirely new article with shining surface and different qualities after electroplating. Before electroplating, article is almost worthless whereas same, after electroplating, is valuable commercial commodity. For instance, spoon, before electroplating, may not have any value whatsoever, whereas same, after electroplating, may be used by Five Star Hotel. Thus, article, after electroplating, has different look, different shape and different value, with different qualities as to corrosion resistance, hardness and durability, etc. end product, which has distinct character, shape and use, is achieved by employment of labour and machinery. Thus, in my opinion electroplating involves 'manufacture' or 'production' because electroplated article is new entity by itself, different from old one, in commercial sense. 13.1 My view derives support from following decisions of High Courts: (a) In Cit v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811, it was held by Gujarat High Court that business of printing balance sheets, profit and loss accounts, dividend warrants, pamphlets, share certificates, etc., was business which consisted wholly of 'manufacture of goods' within meaning of clause (ii) of Explanation 2 to section 23A of Indian Income-tax Act, 1922. (b) In case of Burmah Shell Refineries Ltd. v. G. B. Chand, ITO [1966] 61 ITR 493, it was held by Bombay High Court that companies engaged in refining crude oil were companies engaged in 'manufacture' or 'production' of mineral oil. (c) processing of seeds has been held to be process of manufacture o r production for purpose of section 80J of Act in case of Tarai Development Corpn. v. CIT [1979] 120 ITR 342 (All.). (d) According to decision of Madras High Court in perfect Liner's case (supra), polishing of rough castings and supplying them for use as component parts in internal combustion engines amounts to manufacture of such components. (e) In case of Hiralal Jeetmal (supra), Madhya Pradesh High Court hold that person who was engaged in business of printing and dyeing textiles purchased by him and of sale and supply of printed and dyed material was 'manufacturer'. 13.2 I may also refer to following decisions of Tribunal in support of view I have taken: (a) In ITO v. Elite Sea Foods [1983] 3 ITD 348 (Coch.), it was held that assessee was entitled to get investment allowance on plate freezer used for freezing shrimps purchased and processed before export. (b) In Andhra Pradesh State Seeds Development Corpn. v. ITO [1983] 5 ITD 624 (Hyd.), assessee purchased seeds from agriculturists and processed them by cleaning, grading, preserving and treating them through scientific conditions. Tribunal held that process amounted to 'manufacture' or 'production' for claiming weighted deduction under section 35C of Act. (c) In case of Durandel Foods (P.) Ltd. (supra), assessee-company was engaged in packing, in bottles, malted milk food for another company which supplied malted milk food in bulk. Tribunal held that though operation involved was only of unpacking of drums and packing contents in bottles, such operation resulted in production of commercially different article and, hence, same tantamounted to 'manufacture' or 'production' within meaning of section 32A. (d) In Dr. P. Vittal Bhat's case (supra), it was held by Tribunal that when raw film was exposed and processed, X-ray photographs were produced raw film was exposed and processed, X-ray photographs were produced and operation tantamounted to 'manufacture' or 'production' for purpose of section 32A. (e) According to decision of Tribunal in Nishit Synthetics (P.) Ltd.'s case (supra), conversion of flat yarn into twisted yarn would amount to 'manufacture' for purposes of sections 32A and 80J. (f) In ITO v. Maddi Satyanarayana & Co. (P.) Ltd. [1984] 8 ITD 249 (Hyd.) Tribunal held that conversion of fluecured tobacco into retired tobacco involved 'manufacture' for getting relief under section 80J. (g) According to decision of Special Bench of Tribunal in case of Sixth ITO v. General's New Tread [1985] 13 ITD 460 (Bang.), retreaded tyre is article produced by assessee and, therefore, machinery employed in retreading of tyres is entitled to investment allowance under section 32A. 13.3 In view of aforesaid decisions, I Would hold that electroplating involves 'manufacture' or 'production' of new article, in commercial sense. It may be mentioned at cost of repetition that cases in Burmah Shell Refineries Ltd.' case (supra), Tarai Development Corpn.'s case (supra), Perfect Liners' case (supra), Andhra Pradesh State Seeds Development Corpn.'s case (supra), Nishit Synthetics (P.) Ltd.'s case (supra) and General's New Tread's case (supra) are very close to facts of present case. If (i) refining of crude oil, (ii) processing of seeds, (iii) polishing of rough castings, (iv) conversion of flat yarn into twisted yarn, and (v) retreading of tyres could be considered as 'manufacture' or 'production', there is absolutely no good reason why electroplating should not be so considered. 14. definition of expression 'manufacturing process' as given in Factories Act, also advances case of assessee. According to this definition, 'manufacturing process', inter alia, includes 'any process for making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adopting any article or substance with view to its use, sale, transport, delivery or disposal, etc.' When even 'ornamenting' can be considered to be manufacturing process, there is no good reason to give different treatment to electroplating. argument of learned representative of department that definition of 'manufacturing process' as given in Factories Act, should not be taken into consideration while deciding present case is not acceptable. This definition may not be conclusively decisive of point at issue, but there is no bar in seeking guidance from same. 15. We may examine case from another angle. What is rule of construction of statute object of which is to encourage industrialisation? According to decision of Punjab High Court in Webbing & Belting Factory (P.) Ltd. v. CIT [1961] 43 ITR 234 at p. 238, provision which is intended to encourage setting up of new industrial enterprises must be construed liberally. Similarly, it has been held by Gujarat High Court in CIT v. Satellite Engg. Ltd. [1978] 113 ITR 208 that if principal object of provision is to encourage setting up of new industrial undertakings by offering tax incentives and to give fillip to trade and industry, then interpretation of such provision must be in consonance with avowed aim and object of Legislature and not such as would defeat same. To same effect is view taken by Calcutta High Court in CIT v. Orient Paper Mills Ltd. [1974] 94 ITR 73. I may also refer to following observations of Supreme Court in Idandas's case (supra): "... We might state that in present set up of our socialistic pattern of society when our country has made k strides in various spheres of industrial activities industrial venture must be given most liberal interpretation so as to subserved object of statute ..." (p. 128) In view of aforesaid authorities, there is no good reason why wider meaning should not be given to 'manufacture' or 'production' so as to cover electroplating when object of section 32A is to give fillip to industry. 16. I may now distinguish decision of Calcutta High Court in Hindusthan Metal Refining Works (P.) Ltd.'s case (supra) which is kly relied upon by representative of department in support of his case. In this case, assessee carried on business in 'galvanising' metal on behalf of its customers. High Court held that this did not involve 'manufacture' or 'production' within meaning of section 84(2) (iii) of Act. According to learned representative of department, this authority should be followed to hold that electroplating does not involve 'manufacture' or 'production' of article. I am unable to agree with him or simple reason that there is marked difference between 'galvanising' and 'electroplating'. This would be evident from opinion of technical expert produced by assessee. According to 'Technical Opinion Report' of Andhra Pradesh Industrial & Technical Consultancy Organisation Ltd., 'galvanising' is process of 'providing coatings are used for protection of finished products ranging from structural steel works for buildings and bridges to nuts, bolts, strip, sheet, wire and tube etc.' As against this, 'electroplating', according to aforesaid technical opinion report, means 'deposition of one metal on another by electrolytic action on passing current through cell, for decoration, or for protection from corrosion, etc., metal is taken from anode and deposited on cathode, through solution containing metal as ion'. It may not be out of place to mention here that, according to Encylopedia of Chemical Technology, Vol. 8 by Raymond E. Kirk and Donald F. Other, new and important qualities in decoration, surface protection and engineering performance are attainable for many electroplated articles and electro-disposition frequently offers only method of manufacturing or producing desired surface finish. beneficial results of electroplating may include improved appearance, improved resistance to corrosion, tarnish, chemical attack, and wear, improved frictional and non-galling behaviour, and increased hardness. Thus, whereas 'galvanising' is used for applying coatings of zinc on other metals to protect it from corrosion only, 'electroplating', besides increasing resistance to tarnish or corrosion, changes very properties and dimension of surface of metal. Electroplating may be used even to increase dimension of worn or undersized articles. (See McGraw - Hill Encyclopedia of Science and Technology/6/GAB-HYS at p. 601. ) Thus, there being pronounced difference between 'galvanising' and 'electroplating', authority in Hindustan Metal Refining Works (P.) Ltd.'s case (supra) does not directly cover present case. Since there is no direct authority to decide whether 'electroplating' involves 'manufacture' or 'production' of articles, I would rely upon string of authorities of High Court and Tribunal referred to above in preference to decision of Calcutta High Court in Hindustan Metal Refining Works (P.) Ltd.'s case (supra) and take broader view in matter. 17. last argument of learned representative of department is that assessee is not entitled to investment allowance under section 32A because it undertakes only job works. In this behalf, he relies upon decision of Tribunal in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra). argument of learned representative of department is not acceptable for simple reason that decision of Division Bench of Tribunal in Ahura Shipping & Engg. Co. (P.) Ltd.'s case (supra) cannot be followed in preference to decision of Special Bench of Tribunal in Thiagaraja Industries's case (supra). While dealing with case under section 80J, Special Bench of Tribunal observed in Thiagaraja Industries' case (supra) that section 80J does not require that assessee must not only manufacture o r produce articles but should also own same. According to Special Bench, what is important is manufacturing process and not ownership of articles which are manufactured. On parity of reasoning, it can be safely said that for claiming investment allowance under section 32A , all that is necessary is that machinery should be owned by assessee and same should be used for business of assessee. It is not necessary that raw materials in manufacture or production of articles should also be owned by assessee. In this view of matter, mere fact that assessee- company undertakes job works is not fatal to its claim for investment allowance provided other conditions of section 32A are satisfied. I would, therefore, reject argument of learned representative of department in this behalf. 18. In view of above discussion, I conclude that assessee-company which carries on business of electroplating and undertakes on works in electroplating is entitled to investment allowance under section 32A. 19. I would, therefore, agree with learned Accountant Member and answer question referred to me in affirmative. 20. case will now go to Bench for disposal according to majority view. CORRIGENDA Please insert following Editor's Note at page 3 (Special Bench/Third Member Orders Section) after case referred to': Though view taken by Special Bench in Third ITO v. Indian Rubber & Plastic Co. (1986) 15 ITD 1 (Bom.) that imposition of penalty under section 271(1) (a) was valid even if assessee had suffered interest under section 139 , has been reversed by Supreme Court in case of CIT v. M. Chandra Sekhar [1985] 151 ITR 433, relevant law has since been amended by Finance Act, 1972 w.e.f. 1-4-1972 and, in that view of matter Special Bench order holds good for and from assessment year 1972-73 onwards. *** SRI BALAJI METAL FINISHERS v. INCOME TAX OFFICER