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2013 (3) TMI 351 - HC - Income TaxInvestment allowance - Refusal to issue certificates to the petitioner under section 32A(2B)(ii) - It is the case of the petitioner that he has manufactured or produced caustic soda, liquid chlorine and hydro-chloric acid by using the technology (including the process) and other know-how developed by Central Electrochemical Research Institute (CECRI), which is a unit of National Research and Development Corporation of India (NRDC), a specified laboratory therefore, the certificate ought to have been issued - writ of mandamus directing the respondent No.3 to grant investment allowance at the higher rate of 35% as claimed by the petitioner as against the rate of 25% already granted by the income tax department Held that - On going through the provisions of section 32A(2B)(ii) three conditions were necessary before the higher rate of 35% could be claimed. Firstly the right to use such technology (including any process) or other know-how or to manufacture or produce such article or thing must have been acquired from the owner of such laboratory or from any person deriving title from such owner. Secondly, the assessee was required to furnish, alongwith his return of income for the assessment year for which the deduction was claimed, a certificate from the prescribed authority to the effect that such article or thing was manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or was an article or thing invented in such laboratory. And, thirdly, the machinery or plant was not used for the purpose of business of manufacture or production of any article or thing specified in the list in the 11th schedule. It is an admitted position that the third condition has no applicability in the present case. The second condition is the issue in dispute as to whether such a certificate ought to have been issued or not. In so far as the first condition is concerned, the same seems to have been satisfied because the technology had been invented and developed by CECRI which was a unit of NRDC and had been licenced to TEAM and, in turn, TEAM had licenced that technology to the petitioner and, therefore, the right to use that technology had been acquired from TEAM, which was a licensee of NRDC. The only question that remains to be considered is whether the petitioner employed the technology which was developed by CECRI for the manufacture of its product, that is, caustic soda. As already pointed out above that the petitioner had entered into a composite transaction with TEAM. One component was the purchase of TSIA and the other component was the right to use the technology whereby the said TSIA was used in the manufacturing of caustic soda. Both, the technology for the manufacture of TSIA and the process whereby the TSIA so manufactured was employed for producing caustic soda were developed by CECRI. One component has been utilised by TEAM for the manufacture of TSIA and the other component which relates to the know-how as regards the practical application of TSIA in the manufacture of caustic soda was employed by the petitioner. Therefore, it cannot be said that the petitioner did not employ new plant or machinery for the manufacture or production of caustic soda by using technology or process developed by CECRI. As a result, respondent Nos.1, 2 & 5 are directed to issue the appropriate certificates under section 32A(2B) to the assessee & the same may be presented by the petitioner to the income tax authorities for consequential reliefs in accordance with law - in favour of assessee.
Issues Involved:
1. Quashing of previous orders refusing certificates under section 32A(2B)(ii) of the Income Tax Act, 1961. 2. Issuance of a writ of mandamus for granting certificates for the assessment years 1979-80 to 1983-84. 3. Issuance of a writ of mandamus to admit and take on record the certificates and grant investment allowance at a higher rate of 35%. Detailed Analysis: Issue 1: Quashing of Previous Orders Refusing Certificates The petitioner sought the quashing of orders dated 10.10.1979, 21.01.1980, and 18.05.1985, which refused to issue certificates under section 32A(2B)(ii) of the Income Tax Act, 1961. The orders were based on the reasoning that while the technology developed by CECRI was for the manufacture of Titanium Substrate Insoluble Anodes (TSIA), the petitioner was only using TSIA for manufacturing caustic soda, which was not covered under section 32A(2B). The court found this reasoning flawed, noting that CECRI developed both the technology to manufacture TSIA and the process for using TSIA in the production of caustic soda. Therefore, the petitioner was indeed using CECRI's technology as intended. Issue 2: Issuance of Writ of Mandamus for Granting Certificates The petitioner requested a writ of mandamus directing the respondents to grant certificates under section 32A(2B)(ii) for the assessment years 1979-80 to 1983-84. The court examined the technology and process developed by CECRI and concluded that the petitioner was entitled to the certificates. The technology developed by CECRI was a composite one, covering both the manufacture of TSIA and its use in producing caustic soda. The court found that the petitioner had acquired the right to use this technology from TEAM, which was licensed by NRDC, satisfying the conditions under section 32A(2B). Issue 3: Issuance of Writ of Mandamus to Admit Certificates and Grant Higher Investment Allowance The petitioner also sought a writ of mandamus directing the respondent No.3 to admit the certificates for the relevant assessment years and grant an investment allowance at a higher rate of 35%. The court noted that the petitioner had complied with the necessary conditions under section 32A(2B), including acquiring the right to use the technology from TEAM and employing it in the production of caustic soda. Therefore, the court directed the respondents to issue the appropriate certificates, which the petitioner could then present to the income tax authorities for the higher investment allowance. Conclusion: The court concluded that the petitioner was entitled to the certificates under section 32A(2B) and the higher investment allowance. The impugned orders were set aside, and the respondents were directed to issue the appropriate certificates. The writ petition was allowed, and the petitioner was granted the relief sought.
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