PRAKASH TRADING CO. VS COMMISSIONER OF INCOME-TAX
1997 P T D 251
[220 I T R 1]
[Supreme Court of India]
Present: B. P. Jeevan Reddy and K., S. Paripooran, JJ
PRAKASH TRADING CO.
versus
COMMISSIONER OF INCOME-TAX
Civil Appeals Nos. 452 and 453 of 1978, decided on 20/02/1996.
(Appeals from the judgment and order, dated August 31, 1977 of the Gujarat High Court in I.T.R. No. 70 of 1975).
Income-tax---
----Export---Concessional rate of tax---Export and sale to exporters---Scope of S.2(5)(c) of Finance Act, 1966, and S.2(4)(c) of Finance (No.2) Act, 1967---Vegetable oil and vanaspati mentioned in S.2(5)(c)(8)---Refers to entire industry---Export and sale to exporter of de-oiled cakes ---Assessee not entitled to concessional rate of tax---Indian Finance Act, 1966, S.2(5)(c)-- Indian Finance (No.2) Act, 1967, S.2(4)(c).
In order to encourage export of industrial goods, the Finance Acts of 1966 and 1967 provided an additional incentive. A person engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, and who has exported such articles out of India or has sold the said articles to an exporter was entitled to an additional deduction specified in sub-clauses (ii) and (iii) of clause (a) of section 2(5) of the Finance Act, 1966, and section 2(4) of the Finance (No.2) Act, 1967. The relevant provisions in both the Finance Acts are identical. Both clauses (ii) and (iii) of clause (a) and clause (c) refer to articles only, as does the First Schedule to the Industries (Development and Regulation) Act. All of them carry the same meaning and purport. Moreover, clause (c) being an exception to sub-clauses (ii) and (iii) must follow the same pattern as in the said sub-clauses.
Clause (c) opens with the words "Nothing contained in sub clause (ii) or sub-clause (iii) of clause (a) shall apply in relation to--". Then it proceeds to mention several articles, at the same time specifying the item numbers in the First Schedule to the Industries (Development and Regulation) Act under which the said articles fall. Just as the First Schedule mentions several articles under various heads, so, does clause (c) of section 2(5) of the Finance Act, 1966 and section 2(4) of the Finance (No.2) Act, 1967. The description is identical in both the First Schedule and clause (c). Where clause (c) seeks to refer to the entire item in the First Schedule, it does so and where it seeks to refer only to a particular sub-item of an item in the First Schedule, it says so---and the description is identical.
The assessee-firm was engaged in the manufacture of groundnut oil. It exported, or sold to exporters, de-oiled cakes of the value of Rs.48,92,902 and Rs.24,13,040 respectively, during the accounting years relvant to Assessment years 1966-67 and 1967-68 and claimed the additional deduction in respect of the said amounts under the provisions of section 2(5)(a)(ii) and (iii) of the Finance Act, 1966 and under section 2(4)(a)(ii) and (iii) of the Finance No.2 Act, 1967. The Income-tax Officer rejected the claim. The Appellate Assistant Commissioner and the Tribunal allowed the claim but the High Court, on a reference, held that the deduction was not available in respect of the deoiled cakes as item (8) of clause (c) took away the exemption in respect of the entire industry of "vegetable oils and vanaspati": On appeal to the Supreme Court:
Held, dismissing the appeal, that the assessee was not entitled to deduction from tax in respect of deoiled cakes exported or sold to exporters by it under section 2(5)(a)(ii) and (iii) and section 2(5)(c) of the Finance Act, 1966 read with item No.28 of the First Schedule to the Industries Development and Regulation Act, 1951, for the Assessment year 1966-67 and under section 2(4)(a)(ii) and (iii) and section 2(4)(c) of the Finance No.2 Act, 1967 read with item No.28 of the First Schedule to the Industries Development and Regulation Act, 1951. For the Assessment year 1967-68.
C.I.T v. Prakash Trading Co. (1980) 124 ITR 334 affirmed.
Parekh for P.H. Parekh for Appellant.
Dr. V. Gaurishankar, Senior Advocate, Anil Srivastava and S.N. Terdol, Advocates with him for Respondent.
JUDGMENT
B.P. JEEVAN REDDY, J.----These appeals are preferred by the assessee against the judgment of the Gujarat High Court (see (1980) 124 ITR 334) answering the two questions referred to it, at the instance of the Revenue, in favour of the Revenue and against the assessee. The two questions stated for the opinion of the High Court under section 256(1) are (page 335):
"(1) Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim deduction from tax in respect of de-oiled cakes exported or sold to exporters by it under section 2(5)(a)(ii) and (iii) and section 2(5)(c) of the Finance Act, 1966 read with Item No.28 of the First Schedule to the Industries Development and Regulation Act, 1951, for the Assessment year 1966-67?
(2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim deduction from income-tax in respect of deoiled cakes exported or sold to exporters by it under section 2(4)(a)(ii) and (iii) and section 2(4)(c) of the Finance Act, 1967, read with Item No.28 of the First Schedule to the Industries Development and Regulation Act, 1951, for the Assessment year 1967-68?"
With a view to encourage export of industrial goods, the Finance Acts of 1966 and 1967 provided an additional incentive. A person engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 ("I.D.R. Act"), and who has exported such articles out of India or has sold the said articles to an exporter was entitled to an additional deduction specified in sub clauses (ii) and (iii) of clause (a) of section 2(5) of the Finance Act, 1966, and section 2(4) of the Finance No.2 Act, 1967. The relevant provisions in both the Finance Acts are identical. It would suffice if we refer to the provisions in the Finance Act, 1966. In so far as relevant, the provisions in section 2(5) read as follows:
"2.(5)(a).--In respect of any assessment for the assessment year commencing on the 1st day of April, 1966, in the case of an assessee being a domestic company or an assessee other than a company,--
(i) where his total income includes any profits and gains derived from the export of any goods or merchandise out of India, he shall be entitled to a deduction, from the amount of income-tax with which he is chargeable, of an amount equal to the income-tax calculated at one-tenth of the average rate of income-tax on the amount of such profits and gains included in his total income;
(ii) where he is engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries Development and Regulation Act, 1951 (65 of 1951), and has, during the previous year, exported such articles out of India, he shall be entitled, in addition to the deduction of income-tax referred to in sub-clause (i), to a further deduction, from the amount of income-tax with which he is chargeable for the assessment year, of an amount equal to the income-tax calculated at the average rate of income-tax on an amount equal to two per cent of the sale proceeds receivable by. him in respect of such export;
Explanation.---.....
(iii) where he is engaged in the manufacture of any articles in an industry specified in the said First Schedule and has, during the previous year, sold such articles to any other person in India who himself has exported them out of India, and evidence is produced before the Income-tax Officer of such articles having been so exported, the assessee shall be entitled to a deduction, from the amount of income-tax with which he is chargeable for the assessment year, of an amount equal to the income-tax calculated at the average rate of income-tax on a sum equal to two per cent of the sale proceeds receivable by him in respect of such articles from the exporter .....
(c) Nothing contained in sub-clause (ii) or sub-clause (iii) of clause (a) shall apply in relation to---
(1) fuels
(2) fertilisers,
(3) photographic raw film and paper;
(4) textiles (including those dyed, printed or otherwise proceed) made wholly or in part of jute, including jute twine and rope,
(5) newsprint,
(6) pulp---wood pulp, mechancial, chemical including dissolving pulp,
(7) sugar,
(8) vegetable oils and vanaspati,
(9) cement and gypsum products,
(10) arms and ammunition, and
(11) cigarettes,
respectively, specified in items 2, 18, 20, 23(2), 24(2), 24(5), 25, 28, 35, 37 and 38 of the First Schedule to the Industries Development and Regulation Act, 1951 (65 of 1951)."
The appellant-assessee is a registered partnership-firm engaged in the manufacture of groundnut oil at Veraval. It has a solvent extraction plant at Veraval. It exported, or sold to exporters, de-oiled cakes of the value of Rs.48,92,902 and Rs.24,13,040, respectively, during the accounting years relevant to the Assessment years 1966-67 and 1967-68 and claimed the additional deduction in respect of the said amounts under the provisions of section 2(5)(a)(ii) and (iii) of the Finance Act, 1966, and under section 2(4)(a)(ii) and (iii) of the Finance No.2 Act, 1967. The Income-tax Officer rejected the claim with reference to and relying upon clause (c) of section 2(5) of the Finance Act, 1966, and clause (c) of section 2(4) of the Finance No.2 Act, 1967. On appeal, the Appellate Assistant Commissioner agreed with the assessee's contention that clause (c) aforesaid refers to articles as such and not to industries and since deoiled cake is not mentioned in clause (c), the assessee is entitled to additional deduction. The tribunal affirmed the said view in appeal. At the instance of the Revenue, the Tribunal referred the aforesaid two questions under section 2560).
The only question that arises in these appeals is whether clause (c) refers to articles mentioned therein or whether it refers to industries engaged in the manufacture of those articles. For answering this question, we have to turn to the scheme underlying the provisions aforementioned. Sub-clauses (ii) and (iii), which provide the additional deduction, speak of the Article manufactured in "an industry specified in the First Schedule to the I.D.R. Act", which have been exported out of India by the manufacturer during the relevant accounting year or which have been sold to an exporter who has actually exported them out of India. Clause (c) of section 2(5) of the 1966 Act or section 2(4) of the 1967 Act is in the nature of an exception to sub clauses (ii) and (iii) of clause (a). It follows, as it must, the same pattern. Clause (c) opens with the words "Nothing contained in sub-clause (ii) or sub clause (iii) of clause (a) shall apply in relation to--". Then it proceeds to mention several articles, at the same time specifying the item numbers in the First Schedule to the I.D.R. Act under which the said articles fall. Just as the First Schedule to the I.D.R. Act mentions several articles under various heads, so does clause (c) of section 2(5) of the Finance Act, 1966, and section 2(4) of the Finance Act, 1967. The description is identical in both the First Schedule and clause (c). We may illustrate what we say. The pattern in the First Schedule is to mention an article under a heading item and then mention several categories thereof under the sub-headings (sub-items). For example, Item No.2 in the First Schedule reads:
"2. Fuels:
(1) Coal, lignite, coke and their derivatives.
(2) Mineral oil (crude oil) motor and aviation spirit, diesel oil, kerosene oil, fuel oil diverse hydro-carbon oils and their blends including synthetic fuels, lubricating oils and the like.
(3) Fuel gases--(coal gas, natural gas and the like). "
Now, clause (c) adheres to the said pattern. Where it seeks to refer to the entire item in the First Schedule, it does so and where it seeks to refer only to a particular sub-item of an item in the First Schedule, it says so---and the description is identical. To wit, item No. l in clause (c) is "fuels", the same as the heading of item No.2 of the First Schedule. Item No.2 in clause (c) is "fertilisers", the same as in item No. 18 of the First Schedule. Similarly, item No.3 in clause (c) is "photographic raw filmand paper", the same as Item No.20 in the First Schedule. However, when it comes to Item No.4 in clause (c), it covers only a sub-item of Item No.23 in the First Schedule. Item No.23 of the First Schedule "Textiles (including those dyed, printed or otherwise processed") has five sub-items. It reads:
"23. Textiles (including those dyed, printed or otherwise processed). --(1) Made wholly or in part of cotton, including cotton yarn, hosiery and rope.
(2) Made wholly or in part of jute, including jute twine and rope.
(3) Made wholly or in part of wool, including wool tops, woollen yarn, hosiery, carpet and druggets.
(4) Made wholly or in part of silk, including silk yarn and hosiery.
(5) Made wholly or in part of synthetic, artificial man-made fibres, including yarn and hosiery of such fibres."
Item No.4 in clause (c), however, refers only to sub-item (2) of Item No.23 in the First Schedule but not to other sub-items. Item No.4 in clause (c) reads: "Textiles including those dyed, printed or otherwise processed made wholly or in part of jute including jute twine and rope". Similarly, Item No.5 in clause (c) refers to sub-item No.(2), Item No.24 of the First Schedule and Item No.6 in clause (c) refers to sub-item (5) of Item No.24. In all cases, however, the description of articles is identical. To repeat, both clauses (ii) and (iii) of clause (a) and clause (c) refer to articles only as does not First Schedule to the I,D.R Act. If so , all of them must carry the same meaning and purport Moreover, clause (c) being an exception to sub-clauses (ii) and (iii) must follow the same pattern as in the said sub-clauses it is reasonable to presume so.
For the above reasons, we agree with the High Court and dismiss the appeals. No costs.
M.B.A./1162/FTAppeals dismissed.