COMMISSIONER OF INCOME TAX vs HIMALAYAN ENDEAVOUR (P) LTD.

BHAGABATI PRASAD BANERJEE, J. :

The Tribunal has referred following questions of law before this Court under s. 256(1) of the IT Act, 1961 :

"1. Whether in the facts and circumstances of the case and in view of the fact that the meaning of Industrial Company for the purpose of concessional tax as per the Finance Act, 1980 and Industrial Undertaking for the purpose of benefits under s. 80HH and other benefits are quite different and disputed, the Tribunal is justified in holding that action under s. 154 can be taken by the CIT(A) ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that as the assessee is an industrial company for the purpose of concessional tax, the other benefit, viz., benefit of s. 80HH is also available ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessee is an industrial undertaking within the meaning of s. 80HH and is entitled to the benefit entered in that section ?

Whether the meaning of an industrial company for the purpose of concessional tax and industrial undertaking for the purpose of other benefits in the Act are one and the same ?"

The assessment year involved is 1980-81 for which the relevant accounting period is the financial year 1979-80.

The facts as stated in the Statement of Case are as under :

"The ITO in his order of assessment under s. 143(3) dt. 28th February, 1981, amongst other things noted that the assessee is a private limited company and its business is in the purchase of liquor from another company i.e. Prakash Distillery Co. Ltd. He noted that the business of company was to bottle the produce purchased, corking and packaging of the same and to distribute to the licensed dealers. The ITO mentioned that the company itself did not manufacture or produce article and hence, the company was treated as non-industrial company.

On an earlier occasion, the assessee filed an appeal before the CIT(A), who disposed of the same by his order dt. 8th September, 1981. The assessee moved a petition under s. 154, dt. 11th February, 1982 before the CIT(A) for rectification of certain mistakes apparent on record. It was stated that the ITO is wrong in treating the company as a non-industrial company and charging tax as such and disallowing all claims admissible for industrial company. It was pointed out to the CIT(A) that while disposing of this ground, the predecessor CIT(A) treated and accepted the assessee as an industrial company but failed to mention that the company was entitled to other claims admissible for industrial company. It was also pointed out that while giving effect to the order of the CIT(A), the ITO allowed the benefit of rate of tax for industrial company by did not allow deduction under s. 80HH. Rectification was sought for.

The CIT(A) considered the various aspects of the matter and the submissions made before him, and agreed with the submissions made on behalf of the assessee. He noted that for the purpose of s. 80HH, an industrial company is one which is engaged in manufacturing process, while making a reference to the decision of the Hon''ble Punjab High Court in the case of The State of Andhra Pradesh Vs. Lakshmi Oil Mills and Others, and held that the country liquor produced by the assessee company after processing rectified spirit does not entitle to being classified as an industrial company and accordingly the ITOs finding in this regard was negatived.

The CIT(A) noted that it was, therefore, clear from the above observation of the CIT(A) in his order dt. 8th September, 1981, that he had held that the assessee as an industrial company was engaged in manufacturing process. Accordingly, that part or the order of the CIT(A) was rectified. The rectified portion is produced below.

I therefore, hold that the country liquor produced by the appellant company after processing rectified spirit does entitled it to being classified an industrial company both for purpose of rate of tax also for other claims admissible for industrial company.

The Revenue took up the appeal before the Appellate Tribunal contending that on the facts of the case, the CIT(A) was not justified in rectifying his order under s. 154 and was not justified in allowing the benefit of deduction under s. 80HH to the company. The appellate Tribunal took up the appeal made by the Revenue for disposal along with another appeal, being ITA Nos. 2468/C/81 and 1598/C/82. Vide para 9 of its order dt. 16th September, 1983, the Appellate Tribunal took up the departmental appeal against the order under s. 154 of the CIT(A). It noted that in the original grounds of appeal before the CIT(A), the assessee claimed relief admissible to the assessee by treating the company as an industrial company and the CIT(A) while holding the company as an industrial company, did not specifically state in his order dt. 8th September, 1981, that the assessee was entitled to the consequential relief admissible. After due consideration of the submissions made by both the sides, the Appellate Tribunal was satisfied that the order under s. 154 impugned before it, did not require any interference inasmuch as it was held by the Appellate Tribunal in its own order dt. 16th September, 1983 in ITA No. 2468/C/81 that the assessee is an industrial company. After its perusal of the ground No. 1 before the CIT(A), the Appellate Tribunal noted that the claim of the assessee was for consequential relief admissible to it in case it was held that the assessee was an industrial company, and, therefore, the mistake was patent on the face of the CIT(A)s own order dt. 8th September, 1981, and it was also held that there can be no dispute that the CIT(A) was within the power in rectifying the mistake. The Appeal by the Revenue was dismissed."

Mr. S. K. Mitra, learned Advocate on behalf of the Revenue, submitted that the assessee was not entitled to the benefits under s. 80HH of the Act inasmuch as the assessee has not fulfilled all the conditions that are laid down in the aforesaid section. In this connection the Tribunal found, in agreement with the CIT(A), that the assessee was an industrial company and was entitled to the benefits enuring to an industrial company and, as such, the assessee was also entitled to the consequential benefit under s. 80HH of the Act. There was a categorical finding made by the Tribunal that the assessee was an industrial company for the purpose of concessional tax and also for the purpose of the benefit under s. 80HH of the said Act. The point which has been raised by Mr. Mitra before this Court that the assessee did not fulfil all the conditions laid down under s. 80HH had not been raised. The ITO rejected the case of he assessee simply on the ground that the processing done by the assessee in this regard cannot amount to manufacturing or processing of the goods. The CIT(A) as well as the Tribunal held that the assessee was an industrial company. As this point was not raised nor argued before the IT authorities and the Tribunal, it could not be allowed to be raised for the first time in the Reference particularly in view of the fact that the question whether the assessee fulfilled the other conditions are purely and basically questions of fact. In our view the Tribunal has rightly decided the question. Further, in our view the Tribunal was justified in holding that the action under s. 154 of the IT Act, 1961 taken by the CIT(A) was correct in view of the fact that on record there was no question of having two possible views as to the assessees right to get the concessional benefit under s. 80HH of the Act in view of the fact that the Tribunal was justified in holding that the action under s. 154 taken by the CIT(A) was correct.

In that view of the matter, question Nos. 1, 2, and 3 answered in the affirmative and in favour of the assessee. Question No. 4 was neither raised by the Tribunal nor was it argued before the Tribunal and as such we decline to answer the same.

There will be no order as to costs.

SUHAS CHANDRA SEN, J. :

I agree.