Judgment :- S. Sankarasubban, J. This Income Tax Reference is at the instance of the Revenue under S.256(1) of Income Tax Act. The question referred to are as-follows: 1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction under S.801 of the Income Tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that 'the assessee was employing a process which was akin to manufacture resulting in the production of commercially a new commodity different from the old and worn out casings' and is not the above finding wrong and unreasonable in law and fact? 3. Whether, on the facts and in the circumstances of the case and also in view of the fact that no new article or thing with a substantially changes identity of a product is emerged from the preretreaded tyre, the Tribunal is right in law and fact in holding that'even if retreading does not amount to manufacture, it amounts to production' and is not the above finding wrong and unreasonable? 4. Whether, on the facts and in the circumstances of the case, does retreading amount to production of an article or thing?". 2. The facts pertaining to the questions are as follows: The assessee is a registered firm with the previous year ending on 30th June 1986, relevant to the assessment year 1987-88. The assessee is engaged in retreading of tyre and claim for deduction under S.80-1 of the Income Tax Act (hereinafter referred to as "the Act"). This was allowed in the assessment order, dated 8th March 1988. The Commissioner of Income Tax acting under S.263 of the Act was of the view that assessee was engaged only in a manufacturing process which is not equal to the manufacturing of a new tyre and hence the deduction granted under S.801 was erroneous and prejudicial to the interest of the revenue. Thus he directed the assessing officer to withdraw the relief granted under S.80 I of the Act. The assessee filed an appeal to the Income Tax Appellate Tribunal. The Appellate Tribunal held that the assessee was employing a process which was akin to manufacture resulting in the production of commercially a new commodity different from the old and worn cut casings. The assessee filed an appeal to the Income Tax Appellate Tribunal. The Appellate Tribunal held that the assessee was employing a process which was akin to manufacture resulting in the production of commercially a new commodity different from the old and worn cut casings. Therefore, the assessee is entitled to deduction under S.801 of the Act. 3. We heard learned counsel for the revenue Sri. P.K. Ravindranatha Menon. Learned counsel for the revenue contended that retreading is only replacing the tread. It does not involve manufacture or production of a new article. On the other hand, learned counsel for the assessee Sri. Santhosh contended that a worn out tyre by retreading becomes a new commodity and it can be used and sold as a new commodity. He further contended that the word "manufacture" in S.801 should be given the same meaning as was given to the word in Explanation (iii) to S.10 A of the Act. 4. Before we go into that question, we shall discuss the relevant provisions of S.801 of the Act as it stood at that time. "801. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of such profits and gains of an amount equal to twenty per cent thereof; (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely: (ii) (iii) it manufactures or produces any article or thing, not being any article or thing specified in the Eleventh Schedule, (Emphasis supplied) 5. The question for consideration is whether there is any manufacture or production of any article or thing in retreading of a tyre. Learned counsel for the revenue brought to our notice the meaning of word retread in Websters Dictionary. Retread means tread again; to replace worn tread of the outer cover of a rubber tyre with a new tread. The question for consideration is whether there is any manufacture or production of any article or thing in retreading of a tyre. Learned counsel for the revenue brought to our notice the meaning of word retread in Websters Dictionary. Retread means tread again; to replace worn tread of the outer cover of a rubber tyre with a new tread. Learned counsel for the assessee submitted that the decision in Additional C.I.T. v. Kalsi Tyre P. Ltd., (1981) 131 ITR 636, is apt for a decision in this case. In that case the question that came up for consideration was whether the assessee was entitled to concessional rate of tax provided to an Industrial Company by the Finance Act, 1968. 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 it was contended that the assessee-company which was carrying on the business of retreading tyres was an industrial company. In considering this question, Ranganathan, J. (as he then was) speaking for the Bench held as follows: "The assessee employed certain industrial process to worn out tyres and gave it a new lease of life and the process, though not equivalent to the manufacture of a new tyre, stopped very little short of it. The nature of the activity of the assessee, which was processing, was akin to an industrial or manufacturing activity. Further, for all practical purposes and in the commercial sense of the term, the retreaded tyres were also a new article and they were separately sold in the market in the same way as newly manufactured tyres. Therefore, the assessee was an industrial company as defined in S.2(6)(d) entitled to the concessional rate of tax as applicable to an industrial company." The Division Bench further held that, the only reason why it cannot be called manufacture is that the old article has not completely lost its identity or got converted into a new type of goods. But as pointed out by the Tribunal, for all practical purposes and in the commercial sense of the term, the retreaded tyre is almost a new article and indeed it is well known that retreaded tyres are also separately sold in the market in the same way as newly manufactured tyres. But as pointed out by the Tribunal, for all practical purposes and in the commercial sense of the term, the retreaded tyre is almost a new article and indeed it is well known that retreaded tyres are also separately sold in the market in the same way as newly manufactured tyres. 6. The next decision which was cited in the Bar is C.I.T. v. N.C. Budharaja and Co., (1993) 204 ITR 412. There the Honourable Supreme Court considered the meaning of the words Manufacture, Production and Article. It held as follows: " The words 'manufacture 'and' production' have received extensive judicial attention both under this Act as well as the Central Excise Act and the various sales tax laws. The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture. The meaning of the expression 'manufacture' was considered by this Court in Deputy C.S.T. v. Pio Food Packers, (1980) 46 STC 65, among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. Pathak, J. as he then was, stated the test in the following words: 'Commonly, manufacture is the end result of one or more processes through which the original commodity it made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place." For the word production or produce, in the above case the Supreme Court held that it means bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all by-products, intermediate products and residual products which emerge in the course of manufacture of goo'ds. It also takes in all by-products, intermediate products and residual products which emerge in the course of manufacture of goo'ds. The next word to be considered is "articles". The word is not defined in the Act or the Rules. 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 the context. The word "articles" is preceeded by the words "manufactures or produces". In the above case, the question was whether a dam was an article. The court held that it cannot be an article. 7. Another decision cited is the decision in Delhi Cold Storage P. Ltd. v. C.I. T., (1991)191 ITR 656, where the Supreme Court held that the appellant company running a cold storage was not an industrial company for the purpose of S.2(7)(c) of the Finance Act, 1973. It was held that in cold storage there was no processing of goods. In a Bench decision of this Court in C. W.T. v. Mrs. Daisy Paul, (1990) 183 ITR 22, the question that arose for consideration was whether by reboring the engine, it becomes a new commercial article. In that case, the assessee was a firm carrying on the work of reboring the automobile and marine engines. In that case, the Tribunal held that activity of M/s. Popular Garage clearly amounts to processing of the engine as a result of which an engine which had become unusable becomes usable and gets a new lease of life, that it is entirely different from the repairing activities carried on in a workshop and the work required a high degree of skill and precision. It was finally held that the work cannot be equated with the replacement of worn out parts of an automobile or repairing of the same. But in that case the court was of the view that matter requires further information on fact and hence, it was remanded to the Tribunal. It cannot also come within the word "produce". According to Ramanatha Iyer's Law Lexicon, the words "to produce" refers to a finished or a semi finished article made from a raw material. Thus molasses can fairly be called the produce of a sugar mill (See page 1025, Reprint Edition 1987). 8. It cannot also come within the word "produce". According to Ramanatha Iyer's Law Lexicon, the words "to produce" refers to a finished or a semi finished article made from a raw material. Thus molasses can fairly be called the produce of a sugar mill (See page 1025, Reprint Edition 1987). 8. Thus, according to us, there is no manufacture or production of a new article in the retreading of a tyre. It may be a commodity in the market. The only thing is a worn out tyre becomes usable. We cannot also import the definition of manufacture in Explanation (iii) to S.10A of the Act. Hence the questions are answered in the negative and against the assessee.