Civil Appeal Nos 597 599 NT of 1985 From the Judgment and order dated 351983 of the Punjab  Haryana High Court in Income Tax Reference Nos 61 63 and 64 of 1977 Dr Devi Pal VS Desai OC Mathur Ms A K Verma Ms Meera Verma and section Sukumaran for the Appellant
SC Manchanda and Ms A Subhashini for the Respondent The Judgment of the Court was delivered by PATHAK J
These appeals by special leave are directed against the judgment of the High Court of Punjab and Haryana holding that the sale of insulated copper wires manufactured by the appellant 480 assessee does not entitle it to the benefits conferred by sections 331iii cA and 80E of the Income Tax Act 1961 for the assessment years 1966 67 and 1967 68 and the benefits conferred by sections 331bBi and 80I of the Income tax Act 1961 for the assessment years 1968 69 to 1971 72 Section 33 of the Income Tax Act 1961 provides for the grant of development rebate
Prior to April 1 1968 section 331iiicA of the Income Tax Act 1961 provided 1 In respect of a new ship acquired or new machinery or plant other than office appliances or road transport vehicles installed after the 31st day of March 1954 which is owned by the assessee and is wholly used for the purposes of the business carried on by him a sum by way of development rebate equivalent to i         ii         iii in the case of machinery or plant installed after the 31st day of March 1961 a         b         c where the machinery or plant is installed after the 31st day of March 1965 A for the purposes of business of construction manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule a thirty five per cent of the actual cost of the machinery or plant to the assesee where it is installed before the 1st day of April 1970
and b twenty five per cent of such cost where 481 it is installed after the 31st day of March 1970
B       shall subject to the provisions of section 34 be allowed as a deduction in respect of the previous year in which the ship was acquired or the machinery or plant was installed or if the ship machinery or plant is first put to use in the immediately succeeding previous year then in respect of that previous year
 This provision was substituted with effect from April 1 1968 by the present provision which reads 331a In respect of a new ship or new machinery or plant other than office appliances or road transport vehicles which is owned by the assessee and is wholly used for the purposes of the business carried on by him there shall in accordance with and subject to the provisions of this section and of section 34 be allowed a deduction in respect of a previous year in which the ship was acquired or the machinery or plant was installed or if the ship machinery or plant is first put to use in the immediately succeeding previous year then in respect of that previous year a sum by way of development rebate as specified in clause b
A         B in the case of machinery or plant i where the machinery or plant is installed for the purposes of business of construction manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule a thirty five per cent of the actual cost of the machinery or plant to the assessee where it is in stalled before the 1st day of April 1970 and b twenty five per cent of such cost where it is installed after the 31st day of March 1970
482 These provisions relate to development rebate
A deduction was also available to an assessee in respect of profits and gains from specified industries in the case of certain companies prior to April 1 1968
Section 80E provided 80E 1 In the case of a company to which this section applies where the total income as computed in accordance with the other provisions of this Act includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction manufacture or production of any one or  more of the articles or things specified in the list in the Fifth Schedule there shall be allowed a deduction from such pro fits and gains of an amount equal to eight per cent
thereof in computing the total income of the company
 Section 80E was deleted with effect from April 1 1968 and was substituted by section 80 I which provides 80 I1 In the case of a company to which this section ap plies where the gross total income includes any profits and gains attributable to any priority industry there shall be allowed in accordance with and subject to the provisions of this section a deduction from such profits and gains of an amount equal to eight per cent thereof in computing the total income of the company
 It is not disputed between the parties that the assessee is a company to which the provisions of section 80E and subsequently of section 80I will apply
Section 80I it may be noted was deleted by the Finance Act 1972 with effect from April 1 1973
With effect from April 1 1968 the expression priority industry  was defined in section 80B7 as meaning the business of generation or distribution of electricity or any other form of power or of construction manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time being approved in this behalf by the Central Government
 483 The word Sixth  was substituted for Fifth  by the Finance Act 1968 A with effect from April 1 1969
With effect from April 1 1964 the Fifth Schedule set forth a list of articles and things and items 7 17 and 24 which possess some relevance to this case read as follows 7 Equipment for the generation and transmission of electricity including transformers cables and transmission towers 17 Electronic equipment namely radar equipment computers electronic accounting and business machines electronic communication equipment electronic control instruments and basic components such as valves transistors resisters condensors coils magnetic materials and microwave components 24 Component parts of the articles mentioned in items Nos
4 5 7 and 9 that is to say such parts as are essential for the working of the machinery referred to in the items aforesaid and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose and are in comp lete finished form and ready for fitment
 The Sixth Schedule which replaced the Fifth Schedule with effect from April 1 1969 contained identical items 717 and 24
These appeals relate to the assessment years 1966 67 to 1971 72
The assessee carries on the business of manufacture and sale of insulated copper wires
Before the Income Tax officer it claimed that it constituted a priority industry for the purposes of the provisions of sections 331iiicA and 80E read with items 7 17 and 24 of the Fifth Schedule of the Income Tax Act 1961 for the first two years and sections 331bBi and 80 1 read with items 7 17 and 24 of the Fifth or the Sixth Schedule as the case may be of the Income Tax Act 1961 for the latter four years
The assessee claimed that it was entitled to the benefits conferred by those provisions for the aforesaid assessment years as a priority industry 
It asserted that the wires manufactured by it were covered by the word cables  employed in the articles and things specified in items 7 17 and 24 of the Fifth Schedule 484 for the assessment years 1966 67 1967 68 and 1968 69 and items 7 17 and 24 of the Sixth Schedule of the Income Tax Act for the assessment years 1969 70 to 1971 72
It produced expert evidence in support of its claim
The Income Tax officer rejected the claim made by the assessee
An appeal to the Appellate Assistant Commissioner was dismissed
The assessee then appealed to the Income Tax Appellate Tribunal
The Appellate Tribunal allowed the six appeals and held that the assessee was entitled to the benefits claimed by it as a prority industry 
It noted that although the assessee had based its claim on items 7 17 and 24 of the Schedules the claim was emphatically pressed in the hearing before it under item 7 alone
The question before it then was limited to the point whether the wires manufactured by the asses see fell within item 7
In disposing of the appeals the Appellate Tribunal adverted to its finding in the appeals for the two immediately preceding assessment years 1964 65 and 1965 66
In its appellate order for the assessment year 1964 65 it found that the assessee manufactured aluminium cables which were used in the transmission of electricity and held that therefore it was entitled to the benefit of the Fifth Schedule relevant for those two assessment years
In the appeal pertaining to the assessment year 1965 66 it considered the matter again and upheld the claim in view of its order for the preceding assessment year
It noted that the Revenue had accepted the orders and had not questioned them in reference
It found from a perusal of the Industrial Licences on the basis of which the assessee was operating that there was no change in the nature or type of the goods manufactured by it during the six assessment years before it in appeal
It observed that when it referred to aluminium cables in its earlier orders it should have described them as copper and aluminium cables
Having regard to the material before it the Appellate Tribunal found no reason to change its opinion from the view taken in the preceding assessment years that the manufacture of the cables attracted the benefits claimed by the assessee
Thereafter at the instance of the Revenue the Appellate Tribunal made a reference for the six assessment years to the High Court of Punjab and Haryana for its opinion on the following two questions Whether on the facts and in the circumstances of the case the assessee company was entitled to the benefits conferred by the provisions of sections 331iiica and 80E of the Income Tax Act 1961 485 2
Whether on the facts and in the circumstances of the case the assessee company was entitled to the benefits conferred by the provisions of sections 331bBi and 80 I of the Income Tax Act 1961 The High Court answered those questions in favour of the Revenue and against the assessee
The High Court differed from the Appellate Tribunal and took the view that in the cases for the assessment years under consideration the Income Tax officer had come into possession of fresh facts indicating that the assessee was manufacturing copper wires of a particular type known as winding wires which were exclusively used in the manufacture of different types of gadgets and not for the purpose of generation and transmission of electricity
It observed that the wires were not meant for the generation and transmission of electricity and they would fall within item 7 only if they were meant solely for that purpose and not otherwise
In these appeals it is contended on behalf of the assessee that the High Court has misconstrued the facts found by the Appellate Tribunal and has therefore erroneously held that the cables manufactured by the assessee do not fall within the scope of item 7
It is urged also that the true test for determining whether the cables could be used in the generation and transmission of electricity was that laid down by the Madras High Court in Commissioner of Income Tax Tamil Nadu V vs Dhandayuthapani Foundry Private Ltd 1980 123 l
TR 709 where in considering the question whether an implement could be described as an agricultural implement it was observed that the real test was not whether it was exclusively used for agricultural purposes but whether it was commonly so used and whether it was intimately and directly connected with agricultural operations
The point before us is whether the cables manufactured by the assessee qualify for inclusion in item 7 of the Fifth Schedule or the Sixth Schedule as the case may be having regard to the relevant assessment year
Item 7 speaks of equipment for the generation and transmission of electricity and such equipment includes transformers cables and trans mission towers
To appreciate what is comprehended in item 7 it is permissible to refer to a related entry item 24 which refers to component parts of the articles mentioned inter alia in item 7
When item 24 is read in its entirety it is apparent that the component parts mentioned therein are component parts of what can be described as machinery
Then reading item 7 in conjunction with item 24 the con 486 clusion is inescapable that when item 7 speaks of equipment reference is intended to machinery needed for the generation and transmission of electricity
The item envisages complete self contained units of equipment units which on being put together or connected together constitute the apparatus for the generation and transmission of electricity
Viewed in that context the reference in item 7 to cables must mean cables identifiable as a complete self contained unit in themselves as a distinct unit of equipment when employed in the generation and transmission of electricity
A cable does not fall within item 7 if it is merely a component or part of a component of a unit of equipment or machinery
The High Court is right in our opinion in holding that the Appellate Tribunal erred in ignoring the fresh evidence gathered by the Income Tax officer and considered by the Appellate Assistant Commissioner in the assessment proceedings under consideration
The sales accounts of the assessee showed that the assessee had sold winding wires used in the manufacture of different types of electrical gadgets and for the purpose of transmission of electricity
These are winding wires employed in coils winding of armatures etc
and can not be identified at all as cables in the sense in which item 7 conceives of cables
That being so the test propounded in Commissioner of Income Tax Tamil Nadu V vs Dhandayuthapani Foundry Private Ltd supra does not call for consideration
In the circumstances the questions referred to the High Court for its opinion were rightly answered in the negative in favour of the Revenue and against the assessee
In the result the appeals are dismissed with costs
MLA Appeals dismissed


Summary:
Section 33 of the Income Tax Act 1961 provides for the grant of development rebate
The appellant assessee who carried on the business of manufacture and sale of insulated copper wires claimed for the assessment years 1966 67 to 1971 72 that it was entitled to the benefits conferred by sections 33iiii cA and 80E read with items 7 17 and 24 of the Fifth Schedule and sections 33ibBi and 80 I read with items 7 17 and 24 of the Fifth or the Sixth Schedule as the case may be for the aforesaid assessment years as a priority industry
It contended before the Income Tax officer that the wires manufactured by it were covered by the word cables employed in the articles and things specified in items 7 17 and 24 of the Fifth Schedule for the assessment years 1966 67 1967 68 and 1968 69 and items 7 17 and 24 of the Sixth Schedule of the Income Tax Act for the assessment years 1969 70 to 1971 72
The Income Tax officer rejected the claim made by the appellant
The matter ultimately went before the High Court in a reference
The High Court answered the question in favour of the Revenue and against the appellant assessee on the ground that the wires were not meant for the generation and transmission of electricity and they would fall within item 7 only if they were meant solely for that purpose and not otherwise
Dismissing the appeal  HELD 1
Item 7 of the Fifth Schedule speaks of equipment for the generation and transmission of electricity and such equipment includes transformers cables and transmission towers
To appreciate what is comprehended in item 7 it is permissible to refer to a related 479 entry item 24 which refers to component parts of the articles mentioned inter alia in item 7
When item 24 is read in its entirety it is apparent that the component parts mentioned therein are component parts of what can be described as machinery
Then reading item 7 in conjunction with item 24 the conclusion is inescapable that when item 7 speaks of equipment reference is intended to machinery needed tor the generation and transmission of electricity
The item envisages complete self contained units of equipment units which on being put together or connected together constitute the apparatus for the generation and transmission of electricity
Viewed in that context the reference in item 7 to cables must mean cables identifiable as a complete self contained unit in themselves as a distinct unit of equipment when employed in the generation and transmission of electricity
A cable does not fall within item 7 if it is merely a component or part of a component of a unit of equipment or machinery485F H 486A C Commissioner of Income Tax Tamil Nadu V vs Dhandayuthapani Foundry Private Ltd 1980 123ITR 709 inapplicable
In the instant case the sales accounts of the asessee showed that the assessee had sold winding wires used in the manufacture of different types of electricity
These are winding wires employed in coils winding of armatures etc
and cannot be identified at all as cables in the sense in which item 7 conceives of cables
486D E