Case: Commissioner of Income Tax, Delhi and Rajasthan Vs. Webbing and Belting Factory Private Limited

1. This appeal by certificate granted by the High Court of Punjab is directed against its judgment inx Reference No. 18 of 1958, made by thex Appellate Tribunal on November 11, 1957 The Tribunal had referred the following question to the High Court" Whether, on the facts and in the circumstances of this case, the concession contained in section 15C of the Indianx Act in respect of the industrial undertaking for the manufacture of handloom fabrics at Ghaziabad is available to the assessee ? "The High Court answered the question in the affirmative. The Commissioner ofx having obtained certificate from the High Court under section 66A(2) of the Indianx Act, 1922, the appeal is now before us2. The learned counsel for the revenue contends that the High Court has disregarded the findings of fact made by the Appellate Tribunal and itself arrived at certain findings of fact and on the basis of those findings has answered the question. It is common ground that the High Court has no jurisdiction to do soLet us then consider whether the High Court has in fact disregarded any of the findings of the Appellate Tribunal. The difficulty has mainly arisen because the Appellate Tribunal wrote a very cryptic order. The order reads thus:" The facts have been correctly found by the Appellate Assistant Commissioner, and on those facts it is quite clear that the assessees undertaking does not fall within items (i) and (ii) ofn (2) of section 15C inasmuch as the undertaking was partly formed by transfer to it of machinery and plant that had been used in a business carried on before 1st April, 1948, and had begun to manufacture or produce articles before that date. We would accordingly hold that this industrial undertaking is not one to which that section applies. That being so, the exemption there provided is not available to thee relevant portion of section 15C reads as follows(1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue(2) This section applies to any industrial undertaking which (i) is not formed by the splitting up, or the reconstruction of, business already in existence or by the transfer to a new business of building, machinery or plant used in a business which was being carried on before the 1st day of April, 1948 ;(ii) has begun or begins to manufacture or produce articles in any part of the taxable territories at any time within a period of thirteen years from the 1st day of April, 1948, or such further period as the Central Government may by notification in the official gazette specify with reference to any particular industrial undertaking ; . . . ."

Reasoning:
6. On going through the correspondence, I find that the goods produced by the Bela Road factory were completed except to the extent that they were not bleached by the regular bleaching plant but by local dhobis etc., and as the local dhobis were not able to do expert work, the assessee chose to sell all the manufactured cloth through the canvassing agents of theh Trust Limited, but without the labels of the said Trusts. This is apparent from a letter produced before me in which theFebruary 1947 14, 348March do. 30, 254April do. 11, 692May do. 3, 000June do. 2, 743July do. 9, 897August do. 5, 934November do. 67December do. 631A total production of Rs. 67, 085 cannot be described as pure experimental production and it is not merely the production of samples of launching the bigger production scheme of the assessee. It is true that the assessee was not able to manufacture all the contemplated varieties, yet they had commenced producing goods on the handlooms installed by them in the Bela Road factory prior to 31st March, 1948The contention of the assessee that during these months they had to consume the quota of yarn allotted to them monthly has not much force as the fact remains that the manufacture was carried on. The factory had begun to manufacture articles before 1st April, 1948, and, therefore, is not entitled to the exemption laid down under section 15C."It would be noticed from the order of the Appellate Assistant Commissioner that he did not reject the contention of the assessee, which thex Officer had apparently accepted, i.e., that a pilot project had been set up by the assessee. He further found that because the total production amounted to Rs. 67, 085, it could not be described as " pure experimental production." It is difficult to understand the exact import of the words " pure experimental production ", in the contextIt seems to us that the High Court has exceeded its jurisdiction under section 66 of the Indianx Act. It is true that thex Officer had apparently accepted the fact that the production before April 1, 1948, was experimental, but the Appellate Assistant Commissioner had merely stated that a total production of Rs. 67, 085 could not be described as " pure experimental production ". In other words, the Appellate Assistant Commissioner did not give a clear finding whether the assessee had put up a pilot plant or not. In view of these circumstances, the High Court should have called for a supplementary statement under section 66(4) of the Indianx Act and not gone into the facts itself and come to the conclusion that thex Officer was right in holding that a pilot plant had been set up by the assessee, which became the starting point of the enterprise8. Accordingly we set aside the judgment of the High Court and remand the case to it with the direction that it should call for a supplementary statement from the Appellate Tribunal and then deal with the reference according to law. As the point on which we are allowing the appeal was not taken in the statement of the case, the learned counsel for the assessee contends that the assessee should not be burdened with costs.