1991 (9) TMI 1 - SC - Income Tax

New Industrial Undertaking - Whether Tribunal was right in rejecting the assessee s claim for relief u/s 84 - section 84(7) makes it clear without any doubt that the period of five years was to start from the assessment year relevant to the previous year in which the undertaking began to manufacture or produce articles . Since the language of the sub-section is plain and admits of no ambiguity, there is no scope of applying the rule of interpretation of a fiscal statute

Summary

Issues:
Interpretation of section 84 of the Income-tax Act, 1961 regarding eligibility for relief, classification of products as "articles," commencement of manufacturing for tax relief purposes, and the role of the High Court in advisory jurisdiction.

Analysis:
The case involved an appeal based on a certificate granted by the High Court of Gujarat under section 261 of the Income-tax Act, 1961. The respondent, a public limited company, was engaged in manufacturing chemical products, specifically sodium-carboxy-methyl-cellulose (CMC). The dispute arose regarding the eligibility of the respondent for relief under section 84 of the Act for the assessment year 1966-67. The Income-tax Officer and the Appellate Assistant Commissioner held that the relief was not applicable beyond the specified period. The Tribunal affirmed this decision, stating that the production of cellulose pulp by the respondent in 1961 constituted a finished product, making it ineligible for relief in 1966-67.

The matter was referred to the High Court of Gujarat, which ruled in favor of the respondent, emphasizing that the term "articles" in section 84 referred to the end product of the entire industrial undertaking. The High Court held that the production of cellulose pulp did not constitute the production of "articles" for tax relief purposes in the assessment year 1961-62. However, the Supreme Court disagreed with the High Court's interpretation, stating that the High Court's advisory role did not extend to revising factual findings of the Tribunal unless they were unsupported, perverse, or unreasonable.

The Supreme Court highlighted that cellulose pulp, although a raw material for CMC, was also a marketable commodity by itself. The Court emphasized that the nature of the industrial license and the wide scope of the respondent's memorandum of association supported the production of cellulose pulp as a legitimate manufacturing activity. The Court rejected the argument that relief under section 84 should only apply when CMC was manufactured, emphasizing that the statute's language was clear regarding the commencement of manufacturing or production of "articles."

The Supreme Court dismissed the alternative submission made by the respondent's counsel, stating that it was not raised before the Tribunal and could not be considered on appeal. The Court emphasized that a liberal interpretation of tax statutes was only warranted in cases of genuine ambiguity, which was not applicable in this instance. The Court concluded that the appeal succeeded, setting aside the High Court's judgment and allowing costs in favor of the appellant.