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ORDER Sanjiv Khanna, J. - The present appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) was admitted for hearing on 20th July, 2006, on the following substantial question of law: "Whether the Income Tax Appellate Tribunal was right in holding that manufacture of gold jewellery on job work basis amounts to manufacturing activity by the assessee entitling it to deductions under Section 80HHC(3)(a) of the Income Tax Act?" 2. The appeal relates to the assessment year 1998-99 and impugns the findings recorded against the Revenue by the Income Tax Appellate Tribunal (Tribunal, for short) in their order dated 5th November, 2001. The respondent assessee a public limited company, as per the finding recorded in the impugned order was engaged for the past 35 years in the business of manufacture and sale of hydraulics/machine tools, parts, components and assemblies. The appellant had also started export of jewellery. 3. In the return for assessment year 1998-99, the assessee had claimed deduction under Section 88HHC of the Act, on exports of hydraulic power lift system and gold jewellery. For computation of deduction under the said Section, the assessee had invoked and applied sub-section (3)(a) to Section 80 HHC claiming that it was a manufacturer of the exported goods including jewellery. The assessee had computed deduction at Rs.68,58,239/- by applying clause (a) to sub-section (3) to Section 80HHC. The Assessing Officer, however, held that the assessee was both, manufacturer of exported goods i.e. hydraulic lifts, but was a trader exporter in respect of jewellery items. Therefore, the Assessing Officer invoked and applied sub-section (3)(c) to Section 80HHC of the Act. Consequently, the Assessing Officer calculated indirect cost of the jewellery exported in proportion to the total indirect cost of both hydraulics/machine tools and jewellery business in ratio of the turnover of the respective businesses, to calculate the profits derived by the respondent assessee from exports. On this basis, he arrived at a negative figure of Rs.95,30,881/-. Thus, he denied deduction under Section 80HHC by computing it at NIL. 4. The aforesaid finding…