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Issues involved: Assessment under section 80J of the Income-tax Act for the year 1977-78, determination of whether reconditioning of conveyor belts qualifies as a process of manufacture for claiming relief under section 80J, and assessment of whether the Commissioner's revisional jurisdiction was rightly exercised.
Assessment under Section 80J: The assessee set up a belt reconditioning plant in 1977 and claimed relief under section 80J of the Income-tax Act. The Income-tax Officer initially granted this relief, resulting in a "nil" taxable income for the year. However, the Commissioner revised this order under section 263, deeming it erroneous and prejudicial to Revenue. The Tribunal later overturned the Commissioner's decision, holding that the reconditioned belt qualified as a result of manufacture, entitling the assessee to relief under section 80J. Process of Manufacture for Relief under Section 80J: The Tribunal's decision was challenged by the Revenue, arguing that reconditioning a conveyor belt does not constitute manufacture of a new article. Citing precedent, the Revenue contended that the reconditioned belt, remaining a belt before and after the process, did not result in a new article. The court emphasized the need for a new commodity to emerge from manufacture to qualify for relief under section 80J, which was not the case with reconditioned belts. Exercise of Revisional Jurisdiction by the Commissioner: Regarding the Commissioner's revisional jurisdiction, it was questioned whether the order was prejudicial to Revenue despite the "nil" tax levied initially. The court clarified that the potential for future profits, even if not realized at the time of assessment, justified the Commissioner's intervention. The Commissioner's role was not to predict future commercial success but to ensure compliance with tax laws, thus upholding the revisional order. Conclusion: The court ruled in favor of the Revenue, overturning the Tribunal's decision and affirming the Commissioner's exercise of revisional jurisdiction. The reconditioning of conveyor belts was deemed not equivalent to the manufacture of a new article for the purpose of claiming relief under section 80J. The Revenue was awarded costs amounting to Rs. 1,500.
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