Commissioner of Income Tax vs Strong Steel Private Ltd.

G.T. Nanavati, J.—In this reference u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal, Ahmedabad, has referred the following two questions to this court :

"(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction u/s 80-I as well as higher rate of development rebate u/s 33(1)(b)(B)(i) of the Act on the basis that it is a priority industry ?

(2) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the assessee is entitled to relief u/s 80-I as originally allowed by the Income Tax Officer and, therefore, the action u/s 147(b) of the Act was not justified ?"

The assessee is a re-rolling mill manufacturing G.P. sheets, angles, bars, flats and other ancillary items. It claimed deduction u/s 80-I and development rebate u/s 33(1)(b)(B)(i) on the basis that it was a priority industry. In the original assessment proceeding, the Income Tax Officer allowed the deduction u/s 80-I and also development rebate u/s 33(1)(b)(B)(i). However, the assessment proceedings for the assessment year 1972-73 were reopened and thereafter he passed an order disallowing the deduction and development rebate. The assessee carried the matter in appeal before the Appellate Assistant Commissioner who accepted the contentions of the assessee and allowed the appeal. Aggrieved by the order passed by the Appellate Assistant Commissioner, the Revenue preferred an appeal to the Tribunal but without any success. It, therefore, moved the Tribunal for making a reference to this court.

We need not now refer to the decisions which were cited before the Tribunal as we have now a direct decision of the Supreme Court on the point. In Commissioner of Income Tax, Haryana Vs. M/s. Krishna Copper Steel Rolling Mills, Jagadhri etc. etc., the Supreme Court has held that mild steel rods, bars or rounds are entitled to the higher rate of development rebate u/s 33(1)(b)(B)(i) in relation to machinery or plant installed for such manufacture and to the relief of deduction from profits u/s 80-I as priority industries as they can be said to be engaged in the manufacture or production of articles or things specified in item No. 1, viz., iron and steel (metal), of the list of articles or things specified in Schedule V to the Act. The Supreme Court further held that mild steel rods, bars and rounds manufactured by the assessee can be said to be finished forms of the metal and not articles made of iron and steel. Interpreting item No. 1, the Supreme Court held that word "metal" in "iron and steel (metal)" is obviously not used to denote the metal in its pristine form as an ore or as an extraction from the ore. In the context of a manufacturing industry, it is used for emphasising the distinction between the metal used as a raw material in the manufacture of various articles and the commercial articles made therefrom.

In view of this decision of the Supreme Court, we answer both the questions in the affirmative, i.e., against the Revenue and in favour of the assessee. Reference is disposed of accordingly with no order as to costs.