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Judgment
Rangarajan, J.—In this appeal, the following questions have been referred :
(i) Whether the borrowed capital could be treated as part of capital for purposes of working out relief u/s 80J notwithstanding the provisions of
rule 19A(3) of the Income Tax Rules, 1962, in the facts and circumstances of the case ?
(ii) Whether, on the facts and circumstances of the case, the assessee-company could be treated as an industrial company within the meaning of
section 2(8) (c) of Chapter II of the Finance Act, 1974 ?
(iii) Whether, on the facts and in the circumstances of the case, the amounts earned by way of export incentives and drawback of customs duty
could be treated as income attributable to the processing of goods for purposes of reckoning whether the assessee is an industrial company within
the meaning of section 2(8) (c) of Chapter II of the Finance Act, 1974 ?
The first question, it is fairly conceded, is concluded by the Supreme Court decision in Lohia Machines Ltd. and Another Vs. Union of India
(UOI) and Others, . We, accordingly, answer the first question in the negative and in favour of the Revenue. As far as the second and third
questions are concerned, the issue is one of fact as to whether the assessee is engaged in the manufacture or processing of goods. The Appellate
Tribunal found that the assessee is engaged in processing prawns, cutting and packing them in cartoons, to be made ready for shipping. Moreover,
in the assessment itself, relief u/s 80J of the Income Tax Act had been granted, treating the undertaking of the assessee as an industrial undertaking,
which also requires that the assessee is engaged in the manufacture or processing of goods. There is, therefore, no doubt that the assessee must be
treated as an industrial company within the meaning of section 2(8) (c) of the Finance Act, 1974. Our answer to the second question is, therefore,
in the affirmative and in favour of the assessee. As regards the third question, there can be no doubt that the export incentive being an amount
receivable in respect of the actual business of the assessee, it must be considered to be part of the industrial profit. With regard to duty drawback,
it is clear that when the duty was paid, it was part of the expenditure of the business and, therefore, when the drawback was received, it enhanced
the industrial profits. Hence, our answer to this question alone is in the affirmative and in favour of the assessee. No costs.