2013 (12) TMI 1314 - HC - Income Tax

Deduction u/s 80I - Whether industrial alcohol is covered by the word other alcoholic spirit under Schedule 11 of the Act - Held that - As per the doctrine of ejusdem generis which means of the same kind - It means words of similar class - Where general words follow the enumeration of particular classes of things, the general words will be construed as applying only to things of the some general class as those enumerated - On perusal of Item 1 of Schedule 11 of the Act, there appears to be no ambiguity - Language is clear and speaks for beer and wine followed by the words other alcoholic spirits - The latter words indicate the same species i.e. of liquor falling within the category of beer and wine fit for human consumption - Legislature to their wisdom points out beer and wine and other identical or alcoholic spirits - Industrial alcohol constitute separate class seems to be undisputed fact - The order passed by tribunal does not suffer from any impropriety or illegality - Decided against Revenue.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80-I of the Income Tax Act, 1961.
2. Interpretation of Entry-1 of Schedule XI of the Income Tax Act, 1961.
3. Application of the principle of "ejusdem generis".

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80-I of the Income Tax Act, 1961:

The appeal was filed under Section 260A of the Income Tax Act, 1961, challenging the judgment of the Income Tax Appellate Tribunal, which allowed the assessee's claim for deduction under Section 80-I. The assessee, a cooperative society running multiple distilleries, claimed deductions for producing industrial alcohol. The assessing authority initially allowed the deductions but later withdrew them, arguing that industrial alcohol falls under the prohibited items in Schedule XI, thus not qualifying for deductions under Section 80-I.

2. Interpretation of Entry-1 of Schedule XI of the Income Tax Act, 1961:

The core issue was whether industrial alcohol is covered under "other alcoholic spirits" in Entry-1 of Schedule XI. The Tribunal ruled in favor of the assessee, stating that industrial alcohol does not fall within the same category as beer and wine, which are fit for human consumption. The court examined various definitions and legal precedents, including the U.P. Excise Act and judgments from the Supreme Court, to determine that industrial alcohol, being unfit for human consumption and used primarily for industrial purposes, constitutes a different class from beer and wine.

3. Application of the Principle of "Ejusdem Generis":

The principle of "ejusdem generis" was pivotal in this case. The court explained that this rule applies when general words follow specific ones, limiting the general words to the same kind as the specific words. The court cited multiple legal precedents to support this interpretation. The court concluded that the term "other alcoholic spirits" in Schedule XI should be interpreted to include only those spirits similar to beer and wine, i.e., fit for human consumption. Industrial alcohol, being a different genus, does not fall under this category.

Conclusion:

The court held that industrial alcohol is not included in Entry-1 of Schedule XI, as it is not fit for human consumption and constitutes a different class from beer and wine. The appeal was dismissed, and the Tribunal's decision to allow the deduction under Section 80-I was upheld. The question was answered against the appellant revenue and in favor of the assessee.