1986 (8) TMI 2 - SC - Income Tax

Sale of insulated copper wires manufactured by the appellant-assessee - sales accounts of the assessee showed that the assessee had sold winding wires used in the manufacture of different types of electrical gadgets and for the purpose of transmission of electricity. These are winding wires, employed in coils, winding of armatures, etc., and cannot be identified as cables contemplated by item 7 of list of priority industries- hence assessee is not entitled to development rebate

Summary

Issues:
Interpretation of provisions under sections 33(1)(iii)(c)(A) and 80E of the Income-tax Act, 1961 for assessment years 1966-67 and 1967-68, and sections 33(1)(b)(B)(i) and 80-I for assessment years 1968-69 to 1971-72.

Analysis:
The Supreme Court judgment dealt with appeals challenging the High Court's decision regarding the eligibility of an appellant-assessee for benefits under sections 33(1)(iii)(c)(A) and 80E for certain assessment years, and sections 33(1)(b)(B)(i) and 80-I for subsequent years. The appellant claimed to be a "priority industry" under the specified provisions due to its manufacture of insulated copper wires. The court examined the evolution of relevant provisions and the definition of "priority industry" under section 80B(7) to determine the eligibility of the appellant for the claimed benefits.

The appellant's claim was based on the classification of its products as falling within the scope of items listed in the Fifth or Sixth Schedule of the Income-tax Act, 1961. The Appellate Tribunal initially allowed the appeals, considering the appellant as a "priority industry" entitled to benefits, particularly focusing on item No. 7 related to equipment for the generation and transmission of electricity. However, the High Court disagreed with the Tribunal's findings, emphasizing that the appellant's products, identified as winding wires, were not solely intended for electricity generation and transmission, thus not meeting the criteria under item No. 7.

The Supreme Court analyzed the definition and scope of item No. 7 in conjunction with item No. 24, clarifying that cables referred to in the provision must be distinct units of equipment for electricity generation and transmission, not mere components of machinery. The court upheld the High Court's decision, emphasizing the fresh evidence indicating the nature of the appellant's products as winding wires used in electrical gadgets, not meeting the criteria for inclusion under item No. 7. The court rejected the appellant's argument citing a precedent and affirmed the High Court's interpretation of the facts and provisions.

Conclusively, the Supreme Court dismissed the appeals, upholding the High Court's decision in favor of the Revenue and against the appellant. The judgment clarified the interpretation of relevant provisions and the criteria for determining eligibility as a "priority industry" under the Income-tax Act, 1961, based on the nature and usage of the appellant's manufactured products.