9911796707
TMI Blog1976 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... for 1958-59 ? " The assessee is a public company, carrying on business of manufacture and sale of caustic soda among other chemicals. Caustic soda was being produced by a process using what is called " Billiter Cells ". Since this was found to be uneconomical, the company decided to switch over to " Hooker Cells ". The production capacity was 13.5 tons per day up to the year 1956. It was decided by the company to step up the production to 20 tons per day. The Company had the necessary licence for this purpose. The installation of " Hooker Cells " required a change-over in the power system and the installation of the rectifier. However the " Hooker Cells " could be and were utilised for production as and when they were installed by a suitable adjustment in the power system even before the rectifier was installed. The " Hooker Cells " came to be installed from the middle of 1956 and during the year ended on 31st March, 1957, 30 Hooker Cells started to work along with the 11 Billiter Cells, which were also simultaneously working. From then on, till about February, 1958, there was a gradual reduction in the work of the old Billiter Cells, while the new Hooker Cells increased in numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for the relief under section 84 of the Income-tax Act, 1961. Under that provision, income-tax is not payable by the assessee on so much of the profits or gains derived from any industrial undertaking to which the section applied as did not exceed six per cent. per annum on the capital employed in the undertaking, computed in the prescribed manner. Under section 84(5) of the Act the profits or gains of the industrial undertaking had to be computed in accordance with the provisions contained in Chapter IV-D. Under section 84(7) of the Act the provisions of that section applied to the assessment for the assessment year relevant to the previous year in which the undertaking began to manufacture or produce articles and for the four assessment years immediately succeeding. If the claim of the assessee for the relief under this provision or its earlier counterpart was available for the first time only in the assessment year 1958-59, then the fifth assessment year for which the relief would enure would be the assessment year 1962-63. If the relief for the first time could be had only in the assessment year 1957-58, then the assessee would have exhausted the relief by the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cells installed for the first time in the relevant previous year for the assessment year 1958-59, as it was of the view that there was no separate industrial undertaking consisting only of 30 Hooker Cells installed after 1st of April, 1957. Thus, the Tribunal also confirmed the conclusion of the income-tax authorities. On the above facts, the two questions extracted already have been referred for the opinion of this court. On behalf of the assessee the learned counsel submitted that the industrial undertaking consisted of 60 Hooker Cells and that the said undertaking began to manufacture or produce articles only from the relevant previous year for the assessment year 1958-59. He relied in this connection on the finding of the Tribunal under the Wealth-tax Act for the assessment year 1958-59, in which it had been held that the industrial undertaking had been set up after 1st of April, 1957. As we have already observed, the order of the Tribunal for the assessment year 1958-59 is not before us. No doubt some passages therefrom have been extracted in the Tribunal's order for the year under consideration. However, the question as to whether the assessee was properly granted the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, to be answered accordingly. This answer does not preclude the assessee from working out its relief for any other assessment year. We now take up the second question. The point to be considered is whether the assessee is entitled to the relief under section 84 in respect of 30 Hooker Cells installed during the previous year ended on 31st March, 1958. For this purpose we have to determine what is the industrial undertaking as such. Whether the said undertaking had 30 Hooker Cells or 60 Hooker Cells is not really the criterion. The industrial undertaking relevant for the purpose of section 84 is the unit as such. This unit functioned with 30 Hooker Cells in the relevant assessment year 1957-58. There were additions to this unit in the previous year for the assessment year 1958-59. There is nothing in section 84 which provides for relief with reference to the additions made in the previous year ended on 31st March, 1958. As rightly pointed out by the Tribunal, the relief is available to the industrial undertaking as such. The undertaking as such could function with a number of Hooker Cells in one year and with further number in another year. But when once it had started f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at the business income, because it had no bearing on the business profit of the industrial undertaking. According to the assessee the development rebate could only reduce the profit to a nil figure and would not, therefore, be a deduction from the profits in the real sense. The Income-tax Officer was, however, of the view that the development rebate had to be adjusted against this profit and that as there was no profit after adjusting the development rebate, the relief under section 84 was not allowable to the assessee for this year. The Appellate Assistant Commissioner and the Tribunal confirmed this conclusion. The learned counsel for the assessee submitted that section 33 of the Act allowing development rebate came in for application only after the total income was arrived at, so that it could reduce the taxable profit to nil. In his submission we are concerned with a stage anterior to the computation of the total income so that the deduction contemplated by section 33 had no scope for application at that stage. For the revenue the submission was that section 84(5) contemplated computation of the profits and gains derived from an industrial undertaking in accordance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provided under the Act would, if it exceeded the gross total income, reduce the profit to a minus figure. The minus figure would then be treated as a loss eligible for adjustment in the relevant assessment in accordance with the provisions contained in Chapter VI. Section 33(2) provided for the adjustment of the development rebate so as to reduce the total income to nil. The unabsorbed development rebate would be eligible for adjustment in the subsequent year. This is only a method or manner of allowing the deduction. The deduction would in the present case reduce the total income to nil. In the present case even after allowance of the development rebate the total income of the company as such was Rs. 9,61,509 as computed by the Income-tax Officer. The business income itself was computed at Rs. 8,56,326 after allowing the development rebate. In effect what the assessee wants is the allowance of both the deduction under section 33 as well as the relief under section 84. If section 84 had not referred to the computation of the income in the manner done under Chapter IV-D then the position would have been different. The effect of section 84(5) is to allow the relief under that provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied and the taxable profits and gains have to be computed by deducting the unabsorbed depreciation referable to the industrial undertaking from the total profits and gains of the undertaking. After arriving at this figure, that portion of it which does not exceed six per cent. of the capital employed will have to be exempted from tax. " The above passage would wholly apply to the decision of the point under consideration. The only difference is that in that case the deduction related to the unabsorbed depreciation and in the present case the development rebate. In principle both stand on the same footing. In the Commissioner of Income-tax v. S. S. Sivan Pillai [1970] 77 ITR 354 (SC), the Supreme Court had an occasion to consider the adjustment of unabsorbed depreciation in working out the relief available in the computation under section 15C of the Act. That case related to the claim of the assessee, who was a shareholder in the company, which according to him had profits eligible for the relief under section 15C. If the company had profits eligible for the relief under section 15C, then to that extent, the shareholder could also claim that the proportionate part of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
