Commissioner of Income Tax vs Raja Jewellers

Y.R. Meena, J.—The Tribunal has referred the following question of law for our opinion arising out of its order dated 30-1-1984, u/s 256(1) of the income tax Act, 1961 (''the Act'') in respect of the assessment year 1979-80: Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the assessee is a small scale industrial undertaking and entitled to weighted deduction u/s 35B of the income tax Act, 1961?

The assessee-firm is dealing in the business including exports of precious and semi-precious stones. The trading accounts are under the head "Emerald rough accounts, exports goods accounts, and jawaharat accounts". The main trading activity is in the jawaharat accounts wherein the assessee has shown a gross profit of Rs. 1,79,240 on the total sales of Rs. 6,57,537 giving a gross profit rate of 27.2 percent.

On income shown, the assessee has claimed deduction u/s 35B of the Act Rs. 16,627 on total expenses of Rs. 49,881. The ITO refused to grant deduction to the assessee on the ground that the weighted deduction u/s 35B only can be allowed if the assessee owned the industrial undertaking. The assessee-firm is not in possession of any plant or machinery, therefore, he refused to allow weighted deduction u/s 35B. But at the Tribunal''s stage, the weighted deduction u/s 35B has been allowed. Against that order, the department has filed an application u/s 256(1) to infer the question for opinion of the High Court.

At the outset of the arguments, it is pointed out that the issue is squarely covered by the decision of this court in Commissioner of Income Tax Vs. Dhandia Gems Corporation, We have perused the judgment of this Court in the case of Dhandia Gems Corpn.''s case (supra). After detailed discussion, the answer has been given in favour of the revenue and against the assessee.

Considering the detailed discussion in the case of Dhandia Gems Corpn.''s case (supra), the weighted deduction u/s 35B can only be allowed when the small scale industrial undertaking is owned by the assessee.

In the case in hand, there is not an iota of evidence which shows that any plant or machinery regarding manufacturing of the precious stones is owned by the assessee. Even the learned counsel for the assessee has admitted that no plant or machinery is owned by the assessee.

Considering the undisputed fact and the decision of this Court in the case of Dhandia Gems Corpn.''s case (supra), we hold that the assessee is not entitled to weighted deduction u/s 35B. Accordingly, the question posed is answered in favour of the revenue and against the assessee.