JUDGMENT [ENTITY], J.
1. The petitioner is a public limited company and manufactures and deals in ferro manganese which falls under the category of "ferro alloy" under the [SECTION] to the [ACT].
2. The Central Government in exercise of the power under [SECTION] of the [ACT] (hereinafter referred to as "the Act"), read with [SECTION] of the Act framed the "[ACT]." Paragraph 3 of the Scheme provides that any company which claims that it is eligible for the grant of the certificate in respect of any relevant year may apply to the ITO, and paragraph 5 provides that the ITO, after making such enquiry as he deems fit, can determine the Where the ITO rejects the application, an appeal is provided to the Commissioner of Income-tax under paragraph 5 of the Scheme. As required under paragraph 3 of the Scheme, the petitioner filed two applications for the assessment years 1967-68 and 1970-71 for grant of Tax Credit Certificate under [SECTION] of the Act. [SECTION] of the Act reads as under :
"(1) Where any company engaged in the manufacture or production of any of the articles mentioned in the [SECTION] to the [ACT], is, in respect of its profits and gains attributable to such manufacture or production, -
(i) liable to pay any tax for the assessment year commencing on the 1st day of April, 1965 (hereinafter referred to as the 'base year'), and for any one or more of the five assessment years next following that year; or
(ii) not liable to pay any tax for the base year but becomes so liable for any succeeding year (hereinafter referred to as the 'succeeding base year') and also for any one or more of the assessment years following that year, not being an assessment year commencing on the 1st day of April, 1971, or any subsequent assessment year, and the tax for any such succeeding year exceeds -
(a) in the case referred to in clause (i), the tax payable for the base year;
(b) in the case referred to in clause (ii), the payable for the succeeding base year, then the company shall be granted a tax credit certificate for an amount equal to twenty per cent. of such excess."
3. The ITO, Companies Circle IV(9), Bombay rejected the applications of the petitioner by order dated September 30, 1975. The ITO held that the petitioner is engaged in the manufacture or production of "ferro manganese" and the production of "ferro manganese" would not come under [SECTION] to the [ACT]. The ITO held that [SECTION] covers "ferro alloy" and would not include "ferro manganese" which is manufactured by the petitioner. The ITO further held that the total income assessed of the petitioner for the relevant years includes the amount received by the assessee from the Government on account of import entitlement and which has been credited to the profit and loss account. The ITO felt that this income is not specifically attributable to manufacture or production of ferro manganese, even assuming that the production of that item is covered by the [SECTION] to the [ACT]. The petitioner carried an appeal before the Commissioner of Income-tax, Bombay City-IV, Bombay under paragraph 5 of the Scheme. The Commissioner of Income-tax by order dated March 23,1977, came to the conclusion that "ferro manganese"is a "ferro alloy" and that the finding of the ITO that the product manufactured by the petitioner would not fall under [SECTION] to the [ACT], was clearly erroneous. The Commissioner of Income-tax concurred with the conclusion of the ITO that the amount received by sale of import entitlements is not specifically attributable to the manufacture or production of "ferro manganese" and when this amount is deducted, the profits or gains attributable to the manufacture of "ferro manganese" becomes a loss and, hence, the assessee is not entitled to tax credit certificate under [SECTION] of the Act. The petitioner has approached this court by filing this petition under [SECTION] of the [ACT] on April 26, 1977, challenging the legality of the order passed by the Commissioner of Income-tax.
4. Shri [ENTITY], learned counsel appearing on behalf of the petitioner, submitted that the ITO and the Commissioner of Income-tax were in error in holding that the profits that arise on the sale of import entitlements are not attributable to the manufacture or production of "ferro manganese". The learned counsel urged that the scheme of import entitlements envisaged compensating the industry against the losses suffered on export of goods and as the loss in profits was compensated by issue of import entitlements, the sale thereof must be considered as attributable to the manufacture or production of "ferro manganese". Shri [ENTITY], learned counsel appearing on behalf of the Department, on the other hand, submitted that the expression "attributable" must be considered to mean the profits which have arisen directly out of the manufacture of a specific commodity. Shri [ENTITY] submits that the profits derived out of the sale of import entitlements cannot be attributed to the original manufacture and production and the profits that arise on the sale of these import entitlements are attributable only to the sale of entitilements and not to the manufacture and production of ferro manganese. In view of these rival contentions, the short question which falls for determination is whether the receipts from sale of import entitlements by the petitioner is attributable to the petitioner's business of manufacture or production of ferro manganese.
5. The answer to the question depends upon the meaning to be given to the expression "profits and gains attributable to such manufacture or production" occurring in [SECTION] of the Act. Shri [ENTITY] in this connection relied upon the decision of the Supreme Court in the case of [PRECEDENT]. The Supreme Court considered the question whether the balancing charge arising as a result of the sale of old machinery and buildings can be taken into consideration in computing the total income of the assessee carrying on business of an industry specified under [SECTION] of the Act for the purpose of the special deduction permissible thereunder. [SECTION] of the Act deals with deduction in respect of profits and gains from specified industries in the case of certain companies and, inter alia, provides that in the case of a company to which this section applies, where the total income includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. The Supreme Court considered whether the profits and gains derived from sale of old machinery and buildings were attributable to the business of generation or distribution of electricity and in that connection considered the ambit of the expression "attributable to". Shri Justice [ENTITY], speaking for the Bench, observed (p. 93) :
"As regards the aspect emerging from the expression 'attributable to' occurring in the phrase 'profits and gains attributable to the business of' the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression 'attributable to' and not the expression 'derived from'. It cannot be disputed that the expression 'attributable to' is certainly wider in import than the expression 'derived from'. Had the expression 'derived from' been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generasion and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression 'derived from', as, for instance, in [SECTION] In our view, since the expression of wider import, namely, 'attributable to' has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity."
6. It is obvious from the decision of the Supreme Court that the expression "attributable to" is of wider import and any profit and gains having reasonable nexus to the activity of manufacture or production of ferro manganese must be considered attributable to such manufacture or production. In the case in hand, it is not in dispute that the petitioner manufactured ferro alloy and manganese, and in export of the same in accordance with the incentive scheme of the Central Government, the petitioner secured import entitlement. The profits and gains accrued from the sale of such import entitlements have a direct bearing on the manufacture or production of ferro manganese, and the profits and gains are clearly attributable to the manufacture and production of the same. The Legislature has deliberately used the expression "attributable to" instead of "derived from" and has thereby shown a clear intention to grant relief even in respect of receipts from sources other than the actual conduct of the business of manufacture or production of the specified item. In my judgment, the conclusion reached by the ITO and the Commissioner of Income-tax is clearly erroneous and cannot be sustained.
7. Shri [ENTITY] invited my attention to the view taken by the Karnataka High Court in the case of [PRECEDENT] and in the case of [PRECEDENT] . Shri [ENTITY] also invited my attention to the view taken by the Madras High Court in the case of [PRECEDENT] and in the case of [PRECEDENT]. All these decisions have followed the decision of the Supreme Court in the case of [PRECEDENT], while considering the ambit of the expression "attributable to". I am in respectful agreement with the view taken in these decisions.
8. Shri [ENTITY] very fairly pointed out the decision of the Division Bench of this court in the case of [PRECEDENT], where the Division Bench took the view that the value of the import entitlements constituted profits and gains of business of the assessee within the meaning of [SECTION] of the Act and, therefore, the amount realised by the assessee by the sale of the import entitlements were profits of the assessee in its business and were neither capital receipts nor receipts of a casual or non-recurring nature. Shri [ENTITY] also pointed out that in regard to the assessment of the petitioner for the assessment year 1965-66, the income-tax authorities have held that the profits and gains secured by the sale of import incentives arose directly from out of the business of manufacture of ferro manganese undertaken by the petitioner. It is obvious that the order under challenge which makes a departure from the earlier view is clearly illegal and the petitoners are entitle to the relief and are entitled to the grant of necessary tax credit certificate for the assessment years 1967-68 and 1970-71. It is not in dispute that there is no other impediment in the way of the petitioner to the grant of this certificate.
9. Accordingly, the petition succeeds and the rule is made absolute, and while upholding the finding of the Commissioner of Income-tax that the manufacture and production of ferro manganese falls under [SECTION] to the [ACT], the ultimate order of rejecting the appeal is set aside and the respondents are directed to grant the necessary tax credit certificate for the assessment years 1967-68 and 1970-71 to the petitioner within a period of four weeks from today. In the circumstances of the case, there will be no order as to costs.