COMMISSIONER OF INCOME-TAX VS KALA CARTOONS (P.) LTD
2002 P T D 1113
[252 I T R 658]
[Supreme Court of India]
Present: Y.K. Sabharwal and Brijesh Kumar, JJ
COMMISSIONER OF INCOME-TAX
Versus
KALA CARTOONS (P.) LTD.
(and other appeals and special leave petitions)
Civil Appeals Nos. 3967 to 3971 of 1999 with Civil Appeals Nos. 3972 and 3973 of 1999 and 4500 and 4501 of 2001 and S.L.P. (Civil) Nos. 19397 and 19398 of 1999, decided on /01/.
th
July, 2001. (Civil Appeals Nos.3967 to 3971 of 1999 are from the judgment and order, dated January 22, 1999, of the Kerala High Court in I.T.Rs. Nos. 198 to 202 of 1996).
Income-tax---
----Industrial company---Purchasing, peeling, freezing and exporting shrimps---Whether involves production or manufacture---No material produced regarding the stages through which the shrimps passed as processes involving production or manufacture ---Assessee not "industrial company"---Not eligible to be taxed at lower rate of income-tax ---Indian Finance Act, 1981, S.2(7)(c).
The assessee-company, which claimed to be taxed at a lesser rate as an "industrial company", claimed that its activities involves purchasing, peeling, freezing and exporting of shrimps. The Appellate Tribunal held that those activities amounted to production and the assessee was entitled to be taxed at a lesser rate, relying upon the decisions of the Kerala High Court in CIT v. Marwell Sea Foods (1987) 16 ITR 624 and CIT v. Relish Foods (1989) 180 ITR 454. On a reference, the High Court upheld the decision of the Appellate Tribunal. On appeal.
Held, reversing the decision of the High Court, that, since the assessee had not placed before the taxing authorities a detailed description of the process by which the shrimps were prepared for export and the assessee had not established that its activities amounted to process involving production or manufacture, the assessee was not an "industrial company" and was not entitled to be taxed at the lower rate.
CIT v. Relish Foods (1999) 237 ITR 59 (SC) fol.
CIT v. Marwell Sea Foods (1987) 166 ITR 624 (Ker.)
CIT v. Relish Foods (1989) 180 ITIt 454 (Ker.) ref.
As directed by this Court under section 256(2) of the Income Tax Act, 1961 (briefly, "the Act"), the Income-tax Appellate Tribunal referred the following questions relating to the consecutive assessment years 1980-81 to 1984-85 for the opinion of this Court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the assessee is an industrial company eligible to be taxed only at the rate of 55 percent?
(1a) Whether processing of marine products for export would make the assessee and industrial company?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that it cannot be said that the issue involved herein is a debatable issue and on that basis there was no mistake on the face of the record and are not the findings wrong, unreasonable and illogical?"
In I.T.R. No.123 of 1986 (CIT v. King Fisheries (P.) Ltd. (1999) 237 ITR 46 (Ker.) (F.B.) a Full Bench of this Court on the construction of section 80J and in view of the scheme and object of the Act held that for production or manufacture of processed fish, the assessee(s) would be entitled to relief under section 80J of the Act.
The term "industrial company" is defined under section 2(7)(c) of the Finance Act, 1981, as follows:
" `industrial company' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or recessing of goods or in mining." (Emphasis supplied).
Taking into consideration this definitional section and the Full
Bench decision, we are of the view that the Tribunal rightly held that the assessee was an industrial company.
We, therefore, answer Question No. 1 in the affirmative, that is, in favour of the assessee and against the Revenue.
Turning to Question No. 2, it will be seen that the Assessing Officer held that the assessee was a non-industrial company. In appeal, the Commissioner of Income-tax (Appeals) remanded the matter to the Assessing Officer. It is at that stage, the assessee made an application under section 154 stating that the assessee is an industrial company. The contention of the assessee was rejected by the Assessing Officer. The view taken by the Assessing Officer was agitated in appeal right up to the stage of the Appellate Tribunal and then the Appellate Tribunal relying on a decision of this Court held that the question was beyond the pale of controversy and that the assessee is an industrial company.
We having upheld the view taken by the Appellate Tribunal that the assessee is an industrial company, it does not seem to be necessary to go into Question No.2. The submission of learned senior standing counsel, however, before us is that the Tribunal as well as the Full Bench overlooked the decision of the Supreme Court in Sterling Foods v. State of Karnataka (1986) 63 STC 239, in view of which the question is still debatable. Be that as it may, as the assessee is held to be an industrial company by the Tribunal and by the Full Bench of this Court, which considered the above Supreme Court decision, it must be held that the assessee is an industrial company and in view of this finding, we do not consider it necessary to go into the question of debatability.
We, therefore, return Question No.2 unanswered.
The Department appealed to the Supreme Court.
Rambir Chandra, S.K. Dwivedi and Ms. Sushma Suri, Advocate for Appellant.
M.P. Vinod Advocate for Respondent
ORDER
Civil Appeals Nos. 3667 to 3671 of 1999.
At the instance of the Revenue, the following questions relating to the assessment years 1980-81 to 1984-85 were referred for the opinion of the High Court under section 256(2) of the Income Tax Act, 1961?
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the assessee is an industrial company eligible to be taxed only at the rate of 55 per
(1a) Whether processing of marine products for export would make the assessee an industrial company?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that it cannot be said that the issue involved herein is a debatable issue and on that basis there was no mistake on the face of the record and are not the findings wrong, unreasonable and illogical?"
The High Court by the judgment and order under appeal answered. Questions Nos. 1 and (1a) in the affirmative, that is, in favour of the assessee and against the Revenue. The second question was returned unanswered.
In these appeals, we are not concerned with the second question and in relation thereto, learned counsel for the Revenue did not make any submission. The Tribunal, while answering the aforesaid questions in favour of the assessee, has relied upon the decisions of the Kerala High Court in CIT .v. Marwell Sea Foods (1987) 166 ITR 624 and CIT v. Relish Foods (1989) 180 ITR 454.
The case of the assessee for claiming allowance under section 80HH is that it is an industrial undertaking that manufactures/produces articles. The Tribunal has held that the activities of the assessee involve purchasing, peeling, freezing and export of shrimps. The, said activities were held to be amounting to production. Apart from the above activities, there is not description of what the assessee does to the shrimps after buying except peeling and freezing and
The decision of the High Court in the case of Relish Foods (1989) 180 ITR 454, has been set aside by this Court in the case of CIT v.. Relish Foods (1999) 237 ITR 59. In respect of Marwell Sea Food's case (1987) 166 ITR 624 (Ker.), it was noticed by this Court that the assessee therein had placed before the taxing authorities a detailed description of the process by which prawns were prepared for export and the appellate authority had understood the various stages through which the prawns passed as processes involving production or manufacture. Here nothing of the kind was placed by the assessee before the taxing authorities. The present case is squarely covered by the decision in the case of Relish Foods (1999) 237 ITR 59 (SC). .
For the aforesaid reasons, we answer the foresaid questions. in the negative, that is, in favour of the Revenue and against the assessee.
The appeals are allowed accordingly, leaving the parties to bear their own costs.
C.As. Nos. 3972-3973 of 1999 and S.L.P. ((C) Nos. 18397, and 18398 of 1999:
Leave granted in S.L.P. (C) Nos. 18397 and 18398 of 1999.
In view of the order just made in C.As. Nos.3967 to 3971 of 1999, these appeals are allowed, leaving the parties to bear their own costs.
M.B.A./1064/FC ??????????????????????????????????????????????????????????????????????????????? Appeals allowed.