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TMI Blog2013 (3) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the owner of such laboratory or from any person deriving title from such owner. Secondly, the assessee was required to furnish, alongwith his return of income for the assessment year for which the deduction was claimed, a certificate from the prescribed authority to the effect that such article or thing was manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or was an article or thing invented in such laboratory. And, thirdly, the machinery or plant was not used for the purpose of business of manufacture or production of any article or thing specified in the list in the 11th schedule. It is an admitted position that the third condition has no applicability in the present case. The second condition is the issue in dispute as to whether such a certificate ought to have been issued or not. In so far as the first condition is concerned, the same seems to have been satisfied because the technology had been invented and developed by CECRI which was a unit of NRDC and had been licenced to TEAM and, in turn, TEAM had licenced that technology to the petitioner and, therefore, the right to use that technology had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Research Institute (CECRI), which is a unit of National Research and Development Corporation of India (NRDC). It is the case of the petitioner that CECRI is a specified laboratory and, therefore, the certificate ought to have been issued for the assessment years 1979-80 to 1983-84. A writ of mandamus is sought in this regard. The petitioner has also prayed for issuance of a writ of mandamus directing the respondent No.3 to admit and take on record the said certificates for assessment years 1979-80 to 1983-84 and to grant investment allowance at the higher rate of 35% as claimed by the petitioner as against the rate of 25% already granted by the income tax department to the petitioner. 3. The facts are that the petitioner manufactures inter alia caustic soda at its plant at Nagda, Madhya Pradesh. Most of the caustic soda produced by the petitioner is captively used for production of viscose staple fibre/Rayon. Earlier, the petitioner was using graphite anodes in its process of electrolysis for production of caustic soda. However, the use of graphite plates as anodes had several disadvantages which had been pointed out by the petitioner at the time of filing the application for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be reduced in practice to less than 5 to 6 mm. In case the gap was reduced beyond this level, there was every possibility of the anodes touching the cell bottom containing the flowing film of mercury at certain places, thereby resulting in a short circuit which would damage the anodes, disturb the mercury flow and stop the electrolysis. Metal anodes having smooth surface have a great advantage over graphite anodes in this respect. With proper anode adjustment devices it has been possible to continuously maintain a gap of 2 to 3 mm between the two electrodes, without risking a short circuit. Reduced electrode gap (sometimes called as brine gap) results in lower voltage and a lower power consumption. With the Titanium Substrate Insoluble Anodes (TSIA) the other disadvantages of graphite anodes stated herein-above are also eliminated. Loss of graphite is eliminated. Chlorine gas remains free of Carbon Dioxide and Carbon Monoxide. Apart from a reduced brine gap, the bubble effect is negligible. This results in a reduction in cell voltage which entails a further reduction in power consumption which is a major raw material in the manufacture of Caustic Soda. It was also pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -how for manufacturing Titanium Substrate Insoluble Anodes visited our factory and provided us the necessary technique and guidance for designing and installing the electrolyser suitable for the new technology and process and assisted us in commissioning the same. They also advised us regarding adoption of suitable process conditions. They still continue to advise and guide us whenever we approach them. 7. However, the said applications of the petitioner were rejected. The first rejection came by virtue of the impugned order dated 10.10.1979 which is to the following effect: - I am directed to refer to your letter No.GRCN/79/2795 dated 10th July, 1979 and discussions which Dr. R. Vaidyanathan, your representative had in this Department on 20th Aug., 1979 regarding the issue of certificate u/s 32-A(2B) of the Income-tax Act and to say that your application has been carefully examined in this Department. The clarification sent by you vide your letter No.GR/ND/79 dated the 31st Aug., 1979 have also been examined. It is seen that M/s Titanium Equipment and Anode Manufacturing Co. Ltd., Madras is commercializing CECRI's technology and producing anodes which have been installed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled for a certificate under section 32A(2B) of the Income Tax Act, 1961, in the utilisation of the technology to manufacture of TSIA, the petitioner would not be entitled to the issuance of a certificate as it only uses the TSIA for the manufacture of caustic soda. It was also pointed out by Mr Jatan Singh that such a certificate had been issued to TEAM and they have availed of it. However, Mr Ganesh, the learned senior counsel appearing on behalf of the petitioner, contended that this approach is erroneous because of improper understanding of the technology which was developed by CECRI. CECRI had developed not only the technology to manufacture the TSIA but also the know-how or the process for use of TSIA in the manufacture of caustic soda through electrolysis. He submitted that the technology was a composite technology both for the manufacture of TSIA and for the utilisation of TSIA in the process of manufacture of caustic soda. Furthermore, he pointed out that the license which was granted by NRDC to TEAM was for the manufacture of TSIA for 'the use in the manufacture of caustic soda'. In other words, TSIA manufactured by TEAM could not be sold to any manufacturer other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The payment of royalty by the petitioner is by virtue of the agreement, NRDC has made with the TEAM for the manufacture of anodes. On going through the above extract, we agree with the submission made by Mr Ganesh, that the submissions of the petitioner have not been specifically denied. In other words, it will have to be accepted that what TEAM provided to the petitioner was a composite facility. One part being the supply of TSIA and the other part being the licence to use the technology whereby the TSIA was to be employed for the manufacture of caustic soda. Mr Ganesh, had also drawn our attention to a communication issued by CECRI, which was circulated by the Alkali Manufacturers' Association of India on 27.01.1978. The said communication reads as under: - Sub-Titanium substrate insoluble anodes (TSIA) in chlor-alkali cells. Sir, You may already be aware that this Institute has developed TSIA for chlor-alkali industry. We are glad to inform you that these anodes have been working successfully (in diaphragm/ mercury cells) at D C M Chemical Works, Delhi since March 72, and in Orient paper Mills in Orissa from February 76. Recently we have instal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year for which the deduction is claimed, a certificate from the prescribed authority to the effect that such article or thing is manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory; and (iii) the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule. Explanation For the purposes of this sub-section, (a) laboratory financed by the Government means a laboratory owned by any body including a society registered under the Societies Registration Act, 1860 (21 of 1860) and financed wholly or mainly by the Government; (b) public sector company means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); (c) University means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into a composite transaction with TEAM. One component was the purchase of TSIA and the other component was the right to use the technology whereby the said TSIA was used in the manufacturing of caustic soda. Both, the technology for the manufacture of TSIA and the process whereby the TSIA so manufactured was employed for producing caustic soda were developed by CECRI. One component has been utilised by TEAM for the manufacture of TSIA and the other component which relates to the know-how as regards the practical application of TSIA in the manufacture of caustic soda was employed by the petitioner. Therefore, it cannot be said that the petitioner did not employ new plant or machinery for the manufacture or production of caustic soda by using technology or process developed by CECRI. 16. Thus, in our view, the impugned orders are liable to be set-aside. It is ordered accordingly. As a result, respondent Nos.1, 2 5 are directed to issue the appropriate certificates under section 32A(2B). On the issuance of such certificates, the same may be presented by the petitioner to the income tax authorities for consequential reliefs in accordance with law. 17. The writ petition is allowed ..... 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