Case: Commissioner Of Income Tax, Gujarat Vs. Cellulose Products Of India Ltd

The respondent was granted an industrial licence by the Central Government for the manufacture of sodium-carboxy-methyl-cellulose (for short "CMC"). In pursuance of the said licence, the respondent installed a cellulose plant in which was manufactured cellulose pulp which, in its turn, was meant to be used as a raw material for the manufacture of CMC. It does not appear to be in dispute that the respondent began production of cellulose pulp from March 18, 1961, in the said plant while the production of CMC was started from June 15, 1961In the assessment year in question, namely, 1966-67, the previous year of account being the financial year 1965-66 ending on March 31, 1966, the respondent claimed relief contemplated by section 84 of the Act (as it stood prior to its being deleted with effect from April 1, 1968, by the Finance (No. 2) Act, 1967). The Income-tax Officer took the view that, since the respondent had started production of cellulose pulp from March 18, 1961, it had begun to manufacture or produce finished articles or goods in the year ending on March 31, 1961, and, consequently, the assessment year 1961-62 was the first year in which the assessee was entitled to relief under section 84. According to him, the relief contemplated by section 84 being available only for five years, namely, the assessment year 1961-62 and the four assessment years immediately succeeding as contemplated by sub-section (7) of section 84 of the Act, the respondent was not entitled to the relief claimed in the assessment year 1966-67 which fell beyond the aforesaid period. This finding of the Income-tax Officer was affirmed in appeal by the Appellate Assistant Commissioner. The matter was taken up by the respondent in further appeal before the Income-tax Appellate Tribunal. The respondents contention that the production of cellulose pulp during the month of March, 1961, was a trial production was repelled by the Tribunal and a categorical finding was recorded by it that cellulose pulp manufactured by the respondent during the month of March, 1961, was a finished product which was a marketable commodity. On this view, the Tribunal held that the respondent having begun production or manufacture of a finished product which was capable of being sold in the market in the year of account relevant to the assessment year 1961-62, the last year in which the respondent was entitled to get relief under section 84 of the Act was the assessment year 1965-66 and the claim made by it for the said relief in the assessment year in question, namely, 1966-67, was not maintainable. The Tribunal, however, on an application made in this behalf by the respondent, referred the following question to the High Court of Gujarat for its opinion (See 1977 (110) ITR 151 , 152)Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the assessees claim for relief under section 84 of the Act for the assessment year 1966-67 ?"The High Court, by its judgment under appeal, answered the question aforesaid in the negative, that is, in favour of the assessee and against the Revenue. It held that even though the word "articles" used in sub-section (7) of section 84 of the Act was undoubtedly an ordinary word employed by the Legislature, in the context in which it was used and looking to the object with which it was enacted, it was obvious that it could only refer to the end product of the industrial undertaking as a whole where there was no phased programme of installation and construction. On this view, the High Court found that the mere fact that the respondent started the production of cellulose pulp which was an intermediate product on March 18, 1961, did not mean that the company had begun to produce or manufacture "articles" in the assessment year 1961-62

Court's reasoning:
we are inclined to agree with the contention of learned counsel for the appellant that the High Court, on the facts and in the circumstances of the instant case, committed an error in interfering with the conclusion of the Tribunal. It is settled law that a High Court hearing a reference under the Act does not exercise any appellate or revisional or supervisory jurisdiction over the Tribunal and that it acts purely in an advisory capacity. If the Tribunal, after considering the evidence produced before it on a question of fact, records its finding, it cannot be interfered with in a reference by the High Court unless of course such finding was not supported by any evidence, was perverse or patently unreasonable. In our opinion, the finding of the Tribunal in the instant case did not suffer from any of these infirmities. The finding that the production of cellulose pulp during the month of March, 1961, was not a trial production and that cellulose pulp as manufactured by the respondent was a finished product which was a marketable commodity was essentially finding of fact based on appraisal of evidence. It is true that cellulose pulp constitutes raw material for manufacture of CMC but it has not been disputed before us by learned counsel for the respondent that it was even by itself a finished marketable commodity. The circumstance that the industrial licence granted to the respondent was for the manufacture of CMC and not of cellulose pulp is, in our opinion, keeping in view the nature of the two articles, not of much significance. In the same manner as a licence, for instance, for the manufacture of cloth includes the manufacture of cotton yarn, an intermediate product necessary for manufacturing cloth, the licence granted to the respondent for the manufacture of CMC included the manufacture of cellulose pulp which was an intermediate product to be used in its turn as a raw material for the manufacture of CMC. The relevant clause of the memorandum of association of the respondent-company, already quoted above, is obviously wide in its amplitude. It contemplates manufacture of "chemical products of any nature and kind whatsoever and particularly of CMC, cellulose pulp and other chemical products". Manufacture of cellulose pulp was thus indeed one of the objects of the company. The question involved had to be considered in this background and the Tribunal having done so and recorded the finding of fact referred to above, the High Court obviously committed an error in holding that manufacture of cellulose pulp during March, 1961, was of no consequence and that the first year of production would be the assessment year 1962-63 when CMC was actually manufactured. The decision of the Madras High Court relied on by learned counsel for the respondent reported in, in view of what has been observed above on the facts of the instant case, does not advance the case of the respondent any further than the reasons recorded in the judgment under appealAs regards the alternative submission made by learned counsel for the respondent, suffice it to say that the case on the basis of which this alternative submission is sought to be made was not set up before the Tribunal nor was any such question sought to be referred on the basis of which this alternative submission could be made. It cannot, as such, be permitted to be made in the present appeal. The submission that the provisions of section 84 of the Act should be construed liberally so as to effectuate the object thereof need not detain us for long. It is only when there is any genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being formed that the rule of interpretation canvassed by learned counsel for the respondent may be taken recourse to. In the instant case, a plain reading of sub-section (7) of section 84 of the Act makes it clear without any doubt that the period of five years was to start from the assessment year relevant to the previous year in which the undertaking began to manufacture or produce "articles". Since the language of the sub-section is plain and admits of no ambiguity, there is no scope of applying the aforesaid rule of interpretation. The question as to in which assessment year "the undertaking begins to manufacture or produce articles" is essentially a question to be decided on the facts of each case and on the basis of the evidence placed ont theand at has beenes ofe theed withy ind thes at in theg then could bed againstr offor thes theion incannot beconsidered in thisIt isse athan thect tont of. Thees notthat ife forny of thed in theon of al beperiod oft inthe samen tg tot ind andof theby the High Courtt inve yearsmay bea ret in, therefore,the High Courtng andon sy ofe thet theof thethat ist theor thet theed thatof thent ofd to thent ofwith thed by thent ofed toon ofs tot to the. Inr ande doo thee High Courton ofon ofs noton ofse ofunder sectionnt wason inof thect toon ofn ines of