2002 (3) TMI 602 - AT - Income Tax

Summary

Issues:
Claim under section 80-I of Income-tax Act disallowed based on Schedule-XI classification of synthetic detergent and soap.

Analysis:
The appeal was against the rejection of the assessee's claim under section 80-I of the Income-tax Act by the ld. CIT(A) due to the classification of the assessee's manufacturing activity. The assessee, engaged in detergent manufacturing, argued that it was not a soap manufacturer and thus should not be disallowed the claim under section 80-I based on Schedule-XI classification. The Assessing Officer disallowed the claim citing section 80-I(2)(iii) provisions, which was upheld by the ld. CIT(A) on the grounds that detergent, like soap, is used for washing purposes.

The assessee contended that synthetic detergent and soap are distinct products with different raw materials and purposes. The assessee highlighted the removal of synthetic detergent from Schedule-XI, emphasizing the separation of soap and synthetic detergent as different commodities. Reference was made to the Budget Speech of the Finance Minister to support the argument that soap and detergent are separate items eligible for specified tax concessions.

Drawing from the decision in K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), the assessee argued that legislative speeches are relevant for interpreting statutory provisions. The ld. CIT(A) for another assessment year had allowed the deduction under section 80-I, which was not appealed by the Revenue. The Tribunal found merit in the assessee's argument that soap and synthetic detergents are distinct, as supported by legislative intent and previous decisions. The Tribunal set aside the ld. CIT(A)'s order and directed the Assessing Officer to allow the claim for deduction under section 80-I for the assessee, aligning with the decision in the previous assessment year.

In conclusion, the Tribunal allowed the appeal, emphasizing the distinction between soap and synthetic detergents based on legislative intent and previous decisions. The order of the ld. CIT(A) was overturned, and the Assessing Officer was directed to allow the claim for deduction under section 80-I for the assessee, in line with the decision for the previous assessment year.