1993 (9) TMI 29 - HC - Income Tax

Assessment Year, Business Expenditure, Development Allowance, Development Rebate Reserve, Income Tax Act, Special Deduction, Weighted Deduction

Summary

Issues:
1. Interpretation of section 104 of the Income-tax Act, 1961 regarding its applicability to an industrial company.
2. Determination of whether the assessee company qualifies as an industrial company under section 2(8)(c) of the Finance Act, 1975.

Analysis:
The High Court of Bombay was tasked with deciding on the interpretation and applicability of section 104 of the Income-tax Act, 1961 to an assessee company engaged in the manufacture or processing of goods. The case involved the assessee, which carried out the business of extracting deoiled cake and oil using a solvent plant leased from Maharashtra Oil Industries. The Commissioner of Income-tax initially held that the assessee could not be considered an industrial company under section 2(8)(c) of the Finance Act, 1975. However, the Income-tax Appellate Tribunal later ruled that the assessee qualified as an industrial company as it was engaged in the manufacture or processing of goods, despite not owning the solvent plant outright.

Subsequently, the Income-tax Officer applied section 104 of the Income-tax Act, 1961, contending that the assessee was not involved in the manufacture of goods and thus section 104(4) was not applicable. However, the Commissioner of Income-tax (Appeals) overturned this decision, stating that the assessee, being an industrial company, fell under the purview of section 104(4) which exempts companies engaged in the manufacture or processing of goods from section 104. The Income-tax Appellate Tribunal upheld this decision, citing the earlier order from Income-tax Appeal No. 289/(PN) of 1977-78.

The court dismissed the Revenue's argument that the assessee was not an industrial company or that section 104(4) did not apply to the case. Ultimately, the court answered both questions in the affirmative, ruling in favor of the assessee. The judgment clarified that an industrial company engaged in the manufacture or processing of goods, even if using a leased plant, is covered under section 104(4) of the Income-tax Act, 1961. No costs were awarded considering the circumstances of the case.