Case: J.K. Synthetics Limited Vs. Commissioner of Income Tax, Kanpur

The appellant is a limited company engaged in the manufacture of6 yarn, from imported caprolactum. In the assessment proceedings under the I.T. Act, 1961, for the assessment year, the appellant claimed that6 was an article covered by item 18 of the Fifth and Sixth Schedules of the Act and, therefore, it was entitled to development rebate at 35% under s. 33(1)(b)(B)(i)(a) and for deduction, in terms of s., from the profits and gains attributable to a priority industry. The appellant claimed that6 fell within the scope of the entry      " Petrochemicals including corresponding products manufactured from other basic raw materials like calcium carbide, ethyl alcohol or hydrocarbons from other sources."      2. The claim was allowed by the ITO. When completing the assessment for the assessment year, the ITO took a different view of the claim and referred the case to the Addl. Commissioner under s. 263 of the Act. Thus apprised, the Addl. Commissioner invoked his revisional powers in respect of the assessment order for the assessment year9 and, notwithstanding the evidentiary material placed before him by the appellant, rejected the claim of the appellant, holding that the manufacture of6 was not covered by the entry      3. The appellant appealed to the I.T. Appellate Tribunal. The Appellate Tribunal allowed the appeal and, interalia, found that6 produced by the appellant qualified as a " petrochemical ". The Commissioner applied to the Appellate Tribunal for a reference to the High Court but the reference application was rejected on the ground that no question of law arose in the matterThe Commissioner applied to the High Court under s. 256(2) of the Act for a reference, and on 22nd March, 1978, the High Court called for statement of the case, observing that two questions of law arose      " 1. Whether the Tribunal was right in law in holding that the assessment order was neither erroneous nor prejudicial to the revenue and that, therefore, the Commissioner had no jurisdiction to interfere with it under s. 263 of thex Act, 1961 ?      2.. Whether the Tribunal was right in law in holding that6 is a petrochemical within the meaning of entry 18 of the Fifth Schedule to thex Act, 1961 ? "      The appellant then applied to this court for special leave to appeal against the order of the High Court, and we have today granted special leave

Reasoning: 4. The principal ground on which the appeal is pressed is that the question whether6 is a " petrochemical " in terms of the entry mentioned above is a question of fact and not of law, and that, therefore, the High Court erred in calling for a reference on that question. We have been taken through the material portions of the record and have perused the order of the Appellate Tribunal. We are not satisfied that the finding of the Appellate Tribunal that6 is a " petrochemical " raises a question of law. We have already considered an identical question in the connected Civil Appeals Nos. 1847 to 1850 of 1978 (CIT v. Nirlon Synthetic Fibres and Chemicals Ltd. [1981] 130 ITR 14 (SC)  and we are of the definite view that the question is one of fact