1967 (3) TMI 22 - SC - Income Tax

High Court has exceeded its jurisdiction under s. 66 - High Court should have called for a supplementary statement under s. 66(4) of the IT Act and not gone into the facts itself and come to the conclusion that the ITO was right in holding that a pilot plant had been set up by the assessee which became the starting point of the enterprise - Appeal of revenue allowed - Case remanded

Summary

Issues:
1. Interpretation of section 15C of the Indian Income-tax Act.
2. Jurisdiction of the High Court in disregarding findings of the Appellate Tribunal.
3. Determination of whether an industrial undertaking qualifies for exemption under section 15C.

Analysis:

Interpretation of section 15C of the Indian Income-tax Act:
The case involved a dispute regarding the applicability of section 15C of the Indian Income-tax Act to an industrial undertaking for the manufacture of handloom fabrics at Ghaziabad. The section provided for exemption from tax for newly established industrial undertakings meeting certain criteria, including not being formed by the transfer of machinery used in a business before April 1, 1948. The Appellate Tribunal's order and subsequent proceedings focused on whether the undertaking in question met the requirements outlined in section 15C.

Jurisdiction of the High Court:
The issue of jurisdiction arose concerning the High Court's authority to disregard findings of fact made by the Appellate Tribunal and arrive at its own conclusions. The Appellate Tribunal's order was considered cryptic, leading to a challenge by the revenue's counsel regarding the High Court's jurisdiction to independently assess the facts of the case. It was established that the High Court lacked the jurisdiction to disregard the Appellate Tribunal's findings and make its own determinations.

Determination of exemption eligibility:
The case involved a detailed examination of the facts surrounding the establishment of the industrial undertaking in question. The Income-tax Officer initially rejected the assessee's claim under section 15C, citing the transfer of machinery used before April 1, 1948, to the new factory at Ghaziabad. The Appellate Assistant Commissioner remanded the case for further consideration, leading to a detailed analysis of the production history and nature of operations at the Bela Road factory. The High Court ultimately concluded that the factory at Ghaziabad qualified as a new enterprise, despite the transfer of some machinery used before April 1, 1948, and upheld the assessee's eligibility for the exemption under section 15C.

In conclusion, the Supreme Court set aside the High Court's judgment, emphasizing that the High Court had exceeded its jurisdiction by delving into factual assessments rather than calling for a supplementary statement from the Appellate Tribunal. The case was remanded to the High Court for further proceedings in accordance with the law, with no order as to costs in the appeal.