1995 (9) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Legality and validity of the refusal to grant a certificate under Section 32A(2B)(ii) of the Income-tax Act, 1961.
2. Alleged variations in the technology process and know-how used by the petitioner.
3. Compliance with the requirements of Section 32A(2B) of the Income-tax Act.
4. Entitlement to higher investment allowance under the Income-tax Act.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Refusal to Grant a Certificate:
The petitioners challenged the orders passed by the respondents refusing to grant a certificate under Section 32A(2B)(ii) for the assessment years 1981-82 to 1985-86. The Supreme Court had remitted the matter back to the High Court for fresh disposal with a reasoned judgment. The High Court took up the writ petition for hearing and final disposal.

2. Alleged Variations in the Technology Process and Know-how:
The respondents contended that the petitioner's request was rejected due to four variations:
(a) The use of rice-straw and wheat-straw along with grasses instead of only rice-straw and grasses.
(b) A different ratio of rice-straw and grasses (60:40) compared to the stipulated 70:30.
(c) Non-compliance with the process parameters laid down by the Forest Research Institute.
(d) No agreement with the Forest Research Institute for the manufacture of writing, printing, and craft paper.

3. Compliance with the Requirements of Section 32A(2B):
Section 32A(2B) allows a 35% deduction towards investment allowance for new machinery or plant installed between June 30, 1977, and April 1, 1987, if the article is manufactured using technology developed in a government-financed laboratory. The petitioner argued that they fulfilled all the requirements, and the variations did not alter the character of the technology process and know-how developed by the Forest Research Institute.

4. Entitlement to Higher Investment Allowance:
The court examined whether the petitioner was entitled to the certificate and the benefit of Section 32A(2B). The petitioner had received the technology and know-how from the Forest Research Institute, which was certified. The court noted that some changes in process parameters were necessary for commercial production to meet customer specifications, which did not amount to a change in the technology process or know-how. The court concluded that the petitioner did not commit any major deviation and was entitled to the certificate.

Conclusion:
The High Court allowed the writ petition, setting aside the impugned orders refusing to issue a certificate under Section 32A(2B) of the Income-tax Act. The court directed the respondents to issue the certificate, enabling the petitioner to claim deductions as provided under Section 32A. No order was made as to costs.