Commissioner of Income Tax vs Freeseking Industries (P.) Ltd.

Arijit Pasayat, C.J.—On being moved by the Revenue u/s 256 of the Income Tax Act, 1961 (in short, "the Act"), the following questions have been referred for the opinion of this court by the Income Tax Appellate Tribunal, New Delhi (in short, "the Tribunal") :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessed was entitled to development rebate at higher rate of 25 per cent, in respect of machinery used in the manufacturing of steel castings and forgings even if it was an intermediary stage in the industry ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the deduction u/s 80-I is admissible in respect of profits attributable to the manufacturing of articles even where such manufacturing process as listed in the Sixth Schedule, is an intermediary stage in the industry ?"

The factual position in a nutshell is as follows :

for the assessment year 1974-75, the assessed, a private limited company, claimed the higher rate of development rebate on the machinery used by the assessed, as at the relevant point of time, the assessed carried on the business of air-conditioning and refrigeration equipment, in the process of which it also carried on the activity of steel casting for the manufacture of compressors for air-conditioning and refrigeration machinery. The assessed claimed that profits arising in respect of the activity of steel casting would be eligible for relief u/s 80-I of the Act. It was also claimed that profits in respect of this activity would be eligible for development rebate at 25 per cent. A reference was made to item No. (11) of the Sixth Schedule to the Act, wherein reference has been made to priority industry. The Income Tax Officer disallowed the claim. The matter was carried in appeal before the Appellate Assistant Commissioner (in short, "the AAC"). The said authority upheld the disallowance. The matter was taken in appeal before the Tribunal who allowed the claim referring to some earlier cases decided by it.

On being moved, a reference has been made, as set out above.

We have heard learned counsel for the Revenue, There is no appearance for the assessed.

The question whether an intermediate product would qualify for rebate of development at the higher rate has come up for consideration on several occasions. The apex court had also considered the question relating to manufacture and construction business Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, , wherein relevant parameters were laid down. This court had also an occasion to deal with the matter in Bhagat Construction Co. (P) Ltd. Vs. Commissioner of Income Tax, . Following the reasons indicated by the apex court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, and by this court in Bhagat Construction Co. (P) Ltd. Vs. Commissioner of Income Tax, , we answer the first question in the negative, in favor of the Revenue and against the assessed.

In view of this answer, it is not necessary to answer the second question.

Reference is accordingly disposed of.