1984 (4) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of the premium received in respect of import entitlement.
2. Grant of relief under section 80J of the Income-tax Act, 1961.

Detailed Analysis:

1. Taxability of the Premium Received in Respect of Import Entitlement:
The assessee raised the issue of the taxability of the premium received for import entitlement for the first time before the Commissioner (Appeals). The Commissioner (Appeals) admitted the claim but decided against the assessee, following the decision of the Allahabad High Court in Agra Chain Mfg. Co. v. CIT [1978] 114 ITR 840. The Tribunal noted conflicting decisions by different Benches and referred the matter to a Special Bench for resolution. Consequently, the Tribunal remitted the matter back to the Income Tax Officer (ITO) to follow the Special Bench's decision and resolve the dispute accordingly.

2. Grant of Relief Under Section 80J of the Income-tax Act, 1961:
The assessee's claim for relief under section 80J was not initially made before the ITO but was raised before the Inspecting Assistant Commissioner (IAC) during proceedings under section 144B. The assessee's business, which started in October 1972, involved manufacturing brass and EPNS ware and ready-made garments.

The ITO rejected the claim for relief under section 80J, citing the assessee's failure to provide details regarding capital employed, number of workers, separate balance sheet for the manufacturing unit, and manufacturing expenses. The Commissioner (Appeals) upheld this decision, stating that the assessee did not meet the conditions of being an industrial undertaking or being engaged in manufacturing as required by section 80J. Specifically, the Commissioner (Appeals) noted that the assessee did not create new industrial capacity and did not directly carry out manufacturing operations.

In the Tribunal, the assessee's counsel argued that the authorities misunderstood the nature of the work. The assessee employed artisans for manufacturing brass articles and garments, maintained supervision, and paid wages, thus being involved in the entire manufacturing process. The counsel contended that the assessee satisfied all conditions under section 80J and was entitled to relief.

The department's counsel argued that the assessee did not meet the conditions of section 80J(4), such as employing the requisite number of workers and being a manufacturer. The counsel referenced Supreme Court decisions to support the argument that artisans employed periodically did not constitute employees under section 80J.

The Tribunal found that the necessary information to determine the assessee's eligibility for relief under section 80J was not provided or collected. It emphasized the need for detailed analysis of the assessee's activities, including whether the assessee employed the requisite number of workers and whether the manufacturing process was continuous and unitary. The Tribunal remitted the matter back to the ITO to gather detailed information about the assessee's activities and make a legal conclusion based on the precise scope of section 80J.

Conclusion:
The Tribunal remitted both issues back to the ITO for further examination. The decision on the taxability of the premium received for import entitlement awaits the Special Bench's resolution. The claim for relief under section 80J requires detailed information and analysis of the assessee's manufacturing activities and employment practices. The appeal is treated as allowed for statistical purposes.