Prakash Krishna, J.
1. The Tribunal, Delhi, at the instance of the assessee has referred the following question of law under Section 256(1) of the IT Act, 1961 (hereinafter referred to as 'the Act'), for opinion to this Court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that it was obligatory for the assessee to have machinery and plant and that it had failed to establish that it had installed machinery and plant for the purposes of the business of the undertaking within the meaning of Clause (2) of the Explanation below Sub-section (2) of Section 32A of the IT Act, 1961 ?' '
2. The asst. yr. 1979-80 is involved in the present reference. The assessee is an exporter and is engaged in the business of brass art wares consisting of bell sets, wind chimes, iron bells, candle stands, etc. It claimed itself as manufacturer of these items. The claim of the assessee for weighted deduction under Section 35B of the Act on a total expenditure of Rs. 1,60,248 was disallowed by the ITO. According to the assessee, it is as small scale exporter and is entitled to the benefit under Section 35B(1A). Section 35B was amended by insertion of Section 35B(1A) by the Finance Act, 1978, w.e.f 1st of April, 1978, and was omitted w.e.f. 1st of April, 1980. The ITO found that the assessee was neither small scale exporter nor its activities with regard it to be a manufacturer. The CIT(A), in appeal, also did not agree with the assessee and found that the assessee did not own any machinery for manufacturing and that all the activities were got done from outside. In further appeal by the assessee, the Tribunal came to the conclusion that the assessee has failed to place before it any material to establish that it had installed machinery and plant in the assessment year in question, for the purposes of its business within the meaning of Clause (2) of the Explanation below Sub-section (2) of Section 32A. The Tribunal did not accept the contention of the assessee that it was not obligatory for the assessee to have any machinery and plant and that what was required was that if the assessee had installed a machinery and plant, its aggregate value on the last date of the previous year, for the purposes of business of the undertaking did not exceed Rs. 10,000.
3. Heard Shri Vikram Gulati, the learned Counsel for the assessee, in support of the reference and Shri A.N. Mahajan, the learned standing counsel for the Revenue.
4. The learned Counsel for the assessee contended that the assessee being an exporter, it is not necessary for it to own plant and machinery to enable it to claim weighted deduction under Section 35B of the Act. In support of his submission he has placed reliance upon the following three cases :
1. Griffon Laboratories (P) Ltd. v. CIT : [1979]119ITR145(Cal)
2. Addl. CIT v. A. Mukherjee and Co. (P) Ltd. : [1978]113ITR718(Cal)
3. CWT v. Radhey Mohan Narain : [1982]135ITR372(All)
5. In the case of Griffon Laboratories (P) Ltd. (supra), it was held by the Calcutta High Court that an assessee need not own or possess plant or machinery to be a manufacturer of goods to be treated as an industrial company for the purposes of consessional rate of tax. The manufacture may be either by the assessee itself or by someone under assessee's supervisory control or direction and if income attributable to such activity is not less than 51 per cent of the total income, then it could be treated as an 'industrial company'. The interpretation of 'industrial company' as contained in the First Schedule to the Finance Act, 1966, was involved. Section 2(7) of the Finance Act, 1966, inter alia, reads as follows :
'For the purposes of this section and the First Schedule.--
(d) 'industrial company' means a company which is mainly engaged in -the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.'
There was no requirement in the definition given of an 'industrial company' that the plant and machinery should be owned by the assessee. The judgment is principally based upon the fact that a manufacturer is a person by whom or under whose direction or control the goods are manufactured. A manufacturer may hire a plant or machinery and employ hired labourer and manufacture the goods. The Court was interpreting the definition of 'industrial company' with reference to the word 'manufacture'. It was held that a manufacturer may hire a plant or machinery and employ hired labour and manufacture the goods. But, to earn the benefit of the concessional rate of tax, a company must mainly engage itself in ,the manufacture or processing of goods either personally or someone under his supervision or direction.
6. In the case of A. Mukherjee and Co. (P) Ltd. (supra), the controversy was as to whether the assessee was engaged in any manufacturing or processing activity. In this case also the Court interpreted the meaning of word 'manufacturing' under the Fiscal Acts and was not called upon to interpret the phrase 'small scale industrial undertaking', defined differently in Section 35B(1A) of the Act.
7. In the case of Radhey Mohan Narain (supra), the assessee claimed relief under Section 5(1)(xxxii) of the WT Act. This Court held with reference to the Section 5(1)(xxxii) of the WT Act that an undertaking in order to satisfy the test of 'industrial undertaking' must be (i) engaged in the business of generation or distribution of electricity or any other form of power or (ii) in the constructions of ships or (iii) in the manufacture of process of goods or (iv) in mining. The Court was called upon to interpret the meaning of 'industrial undertaking' as understood in Section 5(1)(xxxii) of the WT Act. The definition of 'industrial undertaking' as given under the WT Act was not similarly worded as it is mentioned in Section 35B(1A) of the Act. At this stage, it is apt to notice the definition of small scale 'industrial undertaking' within the meaning of Section 35B(1A) of the Act. Under Sub-section (1A) of Section 35B of the Act, as it stood during the relevant period, weighted deduction under Section 35B was admissible if the assessee is engaged in the business of export of goods and is either a small scale exporter or a holder of a export house certificate. Under the Explanation to Sub-section (1A), a small scale exporter means a person who exports goods manufactured or produced in any small scale industrial undertaking or undertaking owned by him. Small scale industrial undertaking has been given the meaning assigned to it in Clause (2) of the Explanation below Sub-section (2) of Section 32A of the Act. Sub-section (1A) of Section 35B along with Explanation is reproduced below :
'(1A) Notwithstanding anything contained in Sub-section (1), no deduction under this section shall be allowed in relation to any expenditure incurred after the 31st day of March, 1978, unless the following conditions are fulfilled, namely :
(a) The assessee referred to in that sub-section is engaged in--
(i) the business of export of goods and is either a small scale exporter or a holder of an export house certificate; or
(ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know-how, to persons outside India; and
(b) the expenditure referred to in that sub-section is incurred by the assessee wholly and exclusively for the purposes of the business referred to in Sub-clause (i) or, as the case may be, Sub-clause (ii) of Clause (a).
Explanation.--For the purposes of this Sub-section,--
(a) 'small-scale exporter' means a person who exports goods manufactured or produced in any small scale industrial undertaking or undertakings owned by him :
Provided that such person does not own any industrial undertaking which is not a small scale industrial undertaking;
(b) 'Export house certificate' means a valid export house certificate issued by the Chief Controller of Imports and Exports, Government of India;
(c) 'provision of technical know-how' has the meaning assigned to it in Sub-section (2) of Section 80MM;
(d) 'small-scale industrial undertaking' has the meaning assigned to it in Clause (2) of the Explanation below Sub-section (2) of Section 32A.'
Clause (2) of Explanation below Sub-section (2) of Section 32A reads as follows :
'(2) an industrial undertaking shall be deemed to be a small scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of (the business of the undertaking does not exceed),--
(i) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees;
(ii) in a case where the previous year ends after the 31st day of July, 1980, but before the 18th day of March, 1985, twenty lakh rupees; and
(iii) in a case where the previous year ends after the 17th day of March, 1985, thirty-five lakh rupees, and for this purpose the value of any machinery or plant shall be,--
(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.'
8. The Explanation to Section 35B(1A) provides that 'small scale exporter' means a person who exports goods manufactured or produced in any small scale 'industrial undertaking' or undertakings 'owned by him'. The phrase 'owned by him' is very important so far as Section 35B of the Act is concerned. The said phrase does not find place in the case of 'industrial company' and was not subject-matter of consideration of the High Court in any of the three rulings relied upon by the learned Counsel for the assessee. It is well established that when the legislature has used certain phrase, some meaning has to be assigned to it. It cannot be said that the phrase 'owned by him' in the Explanation is redundant. While interpreting an statute, it is generally said that regard must also be had to the scheme and context of the statutory provisions. The aggregate value of the machinery and plant should not exceed the prescribed limit is also indicative of the fact that the plant and machinery should be owned by the assessee. A manufacturer or processor who does not own any plant and machinery upto the prescribed limit would not be entitled to claim weighted deduction under Section 35B of the Act, in view of Clause (1A) of Section 35B, as it stood by the Finance Act, 1978.
9. All the three authorities have found that the assessee does not own any plant and machinery. The learned Counsel for the assessee invited the attention of this Court towards the balance sheet and the schedule of fixed assets of the assessee for the relevant assessment year. The total value of the fixed assets as shown in the schedule is of Rs. 31,975 which consists of furniture and fixtures, electric fitting, car, scooter and Bhatti equipment. The Tribunal noticed the fact that depreciation on Bhatti was disallowed by the ITO. But, the assessee did not file any appeal against the refusal of the ITO to grant depreciation on the said Bhatties. The Tribunal has recorded a finding that no material was placed before it by the assessee to establish that it had installed machinery and plant in the assessment year in question, for the purposes of its business within the meaning of Clause (2) of the Explanation below Sub-section (2) of Section 32A. It was not the case of the assessee before the authorities below, as noticed by the Tribunal, that the assessee owns any machinery or plant. Therefore, the finding of the Tribunal that the assessee is not entitled for the weighted deduction under Section 35B of the Act as it did not have any machinery or plant in the relevant assessment year, is correct in view of the provisions of Section 35B(1A) of the Act.
10. In view of the foregoing discussion, we answer the question of law referred to us in affirmative, i.e., against the assessee and in favour of the Department. But, no order as to costs.