1989 JTR(SC) 273
1989 AIR(SC) 1490 ; 1989 77 CTR 75 ; 1989 59 FLR 405 ; 1989 177 ITR 431 ; 1989 2 JT 264 ; 1989 1 Scale 1151 ; 1989 Supp2 SCC 523 ; 1989 SCC(Tax) 158 ; 1989 2 SCR 772 ; 1989 TaxLR 574 ; 1989 44 Taxman 189 ; 1989 KHC 805
SUPREME COURT OF INDIA
R.S. PATHAK, CJI., M.H. KANIA, J.
Commissioner of Income-tax, Amritsar, Appellant
Versus
Straw Board Manufacturing Co. Ltd., Respondent.
Civil Appeals Nos. 519-521 of 1975
Decided on 28- 4-1989.
Act
Referred
:FINANCE ACT : Sch.1, Sch.5 Item.16
INCOME TAX ACT : S.33(b)(b)(i), S.80(e)
INDUSTRIES DEVELOPMENT AND REGULATIONS ACT : S.10
Inserted by the Finance Act, 1966 – Section 80 - Industries (Development and Regulation) Act, 1951 – Section 10 – Income tax – Rebate - Assessee manufactures straw board - Assessee claimed concessional rates of income-tax, development rebate at higher rate and deduction under S. 80-E of Income-tax Act, 1961 on ground that the manufacture of strawboard was a priority industry - For the assessment year total income assessed was sum and against the basic rate of 80 per cent assessee claimed rebate at the rate of 35 per cent and on the balance at 26 per cent - Income-tax Officer allowed rebate at 30 per cent and at 20 per cent on the balance - Assessee claimed development rebate under S. 33 of Income-tax Act at rate of 25 per cent on value of the machinery installed but rebate was allowed at 20 per cent only - Assessee also claimed benefit under S. 80-E (inserted by the Finance Act, 1966 with effect from 1 April, 1966) to the extent of the income determined by the Income-tax Officer at sum received from the manufacture of strawboard - This industry is mentioned at Item No. 16 in Fifth Schedule to the Income-tax Act as substituted by the Finance Act, 1965 - Claim of the assessee was rejected by Income-tax Officer - Total income of the assessee was determined - Assessee claimed relief under S. 80-E to the extent received as income from manufacture of strawboard - This claim was similarly rejected by Income-tax Officer on the ground that the assessee could not be described as a priority industry - Whether strawboard can be said to fall within the expression paper and pulp mentioned in Schedules relevant to the respective assessment years – Held, High Court has held that strawboard - Industry is covered within the expression paper and pulp appearing in the relevant Schedules of the Income-tax Act and has, therefore, answered the questions referred to it in the affirmative, in favour of the assessee and against the Revenue - High Court has also referred to circumstance that process of manufacturing strawboard is identical with that of manufacturing paper - Expression paper and pulp in the Industries (Development and Regulation) Act includes paperboard and strawboard - Court attention has been drawn to the Entry relevant to the assessment year which speaks of paper and pulp including paper products and, it is said, strawboard is evidently not within the natural meaning of the word paper - Court do not think that the submission merits serious consideration - Newsprint, paperboard and strawboard have been specifically mentioned in the entry in order to make it clear that they are included within the meaning of the word paper - In court judgment, High Court is right in taking the view which it has, and appeals must be dismissed - Appeals are dismissed - Appeals dismissed.
Inserted by the Finance Act, 1966 – Section 80 - Industries (Development and Regulation) Act, 1951 – Section 10 – Income tax – Rebate - Assessee manufactures straw board - Assessee claimed concessional rates of income-tax, development rebate at higher rate and deduction under S. 80-E of Income-tax Act, 1961 on ground that the manufacture of strawboard was a priority industry - For the assessment year total income assessed was sum and against the basic rate of 80 per cent assessee claimed rebate at the rate of 35 per cent and on the balance at 26 per cent - Income-tax Officer allowed rebate at 30 per cent and at 20 per cent on the balance - Assessee claimed development rebate under S. 33 of Income-tax Act at rate of 25 per cent on value of the machinery installed but rebate was allowed at 20 per cent only - Assessee also claimed benefit under S. 80-E (inserted by the Finance Act, 1966 with effect from 1 April, 1966) to the extent of the income determined by the Income-tax Officer at sum received from the manufacture of strawboard - This industry is mentioned at Item No. 16 in Fifth Schedule to the Income-tax Act as substituted by the Finance Act, 1965 - Claim of the assessee was rejected by Income-tax Officer - Total income of the assessee was determined - Assessee claimed relief under S. 80-E to the extent received as income from manufacture of strawboard - This claim was similarly rejected by Income-tax Officer on the ground that the assessee could not be described as a priority industry - Whether strawboard can be said to fall within the expression paper and pulp mentioned in Schedules relevant to the respective assessment years – Held, High Court has held that strawboard - Industry is covered within the expression paper and pulp appearing in the relevant Schedules of the Income-tax Act and has, therefore, answered the questions referred to it in the affirmative, in favour of the assessee and against the Revenue - High Court has also referred to circumstance that process of manufacturing strawboard is identical with that of manufacturing paper - Expression paper and pulp in the Industries (Development and Regulation) Act includes paperboard and strawboard - Court attention has been drawn to the Entry relevant to the assessment year which speaks of paper and pulp including paper products and, it is said, strawboard is evidently not within the natural meaning of the word paper - Court do not think that the submission merits serious consideration - Newsprint, paperboard and strawboard have been specifically mentioned in the entry in order to make it clear that they are included within the meaning of the word paper - In court judgment, High Court is right in taking the view which it has, and appeals must be dismissed - Appeals are dismissed - Appeals dismissed.
A.Subhashini, Abha Jain, G.C.Sharma, K.C.DUA, R.K.JAIN, Rakesh K.Khanna, Y.S.Chitale
JUDGMENT
PATHAK, CJI. :— These appeals by special leave are directed against a judgment of the High Court of Punjab and Haryana disposing of an Income-tax Reference in favour of the respondent-assessee.
2. The assessee manufactures straw board. For the assessment years 1965-66, 1966-67 and 1967-68 (the relevant previous years being the respective calendar years 1964, 1965 and 1966), the assessee claimed concessional rates of income-tax, development rebate at higher rate and deduction under S. 80-E of the Income-tax Act, 1961 on the ground that the manufacture of strawboard was a priority industry. For the assessment year 1965-66 the total income assessed was Rs. 17,71,334/- and against the basic rate of 80 per cent the assessee claimed rebate at the rate of 35 per cent up to Rs. 10,00,000/- and on the balance at 26 per cent. The Income-tax Officer allowed the rebate at 30 per cent up to Rs. 10,00,000/- and at 20 per cent on the balance. For the assessment year 1966-67 the assessee claimed development rebate under S. 33 of the Income-tax Act at the rate of 25 per cent on the value of the machinery installed after 1 April, 1965 worth Rs. 34,287/-, but rebate was allowed at 20 per cent only. The assessee also claimed benefit under S. 80-E (inserted by the Finance Act, 1966 with effect from 1 April, 1966) to the extent of the income determined by the Income-tax Officer at Rs. 8,17,485/- received from the manufacture of strawboard. This industry is mentioned at Item No. 16 in the Fifth Schedule to the Income-tax Act as substituted by the Finance Act, 1965. The claim of the assessee was rejected by the Income-tax Officer. For the assessment year 1967-68 the total income of the assessee was determined at Rs. 11,00,885/- The assessee claimed relief under S. 80-E to the extent of Rs. 7,50,316/-received as income from the manufacture of strawboard. This claim was similarly rejected by the Income-tax Officer on the ground that the assessee could not be described as a priority industry. The Income-tax Officer took the view that the manufacture of strawboard was not covered by the words paper and pulp in the relevant Schedules pertaining to the assessment years 1966-67 and 1967-68.
3. The assessee appealed to the Appellate Assistant Commissioner of Income-tax in respect of the three assessments, but the appeals were dismissed. In second appeals filed in all the three cases, the assessees plea that the manufacture of strawboard was a priority industry was accepted and the Appellate Tribunal held that the assessee was entitled to the statutory rebates claimed by it. At the instance of the Revenue, the Tribunal referred the following questions to the High Court for its opinion :
"Assessment year 1965-66
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that strawboard is covered by the term paper and pulp appearing in paragraph F of Part I read with Part III of the First Schedule to the Finance Act, 1965 (Act No. X of 1965)?
Assessment years 1966-67 and 1967-68
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that strawboard is covered by the term paper and pulp appearing at item 16 of the Fifth Schedule to the Income-tax Act, 1961 and in allowing the assessees claim under section 80-E of the Act?"
4. The High Court has held that the strawboard. industry is covered within the expression paper and pulp appearing in the relevant Schedules of the Income-tax Act and has, therefore, answered the questions referred to it in the affirmative, in favour of the assessee and against the Revenue.
5. The sole question before us is whether strawboard can be said to fall within the expression paper and pulp mentioned in the Schedules relevant to the respective assessment years. To resolve the question it is necessary first to examine the significance and scope of the Schedules. The provision for rebate has been made for the purpose of encouraging the setting up of new industries, and the industries are those described in the relevant Schedules. It seems to us clear that when the Schedules refer to paper and pulp they in fact intend to refer to the paper and pulp industry. That being so, the next question is whether the strawboard industry can be described as forming part of the paper and pulp industry. We have no doubt in our mind that it does. The expression has been used comprehensively. It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity a liberal construction should be put upon the language of the statute. From the material before us, which we have carefully considered, that is the only reasonable conclusion to be reached in these cases. The High Court has referred to the licence dated 31 May, 1954 issued to the assessee that the undertaking of the assessee was registered in terms of S. 10 of the Industries (Development and Regulation) Act, 1951, and the details given in the licence declare that it relates to a Schedule industry which includes newsprint, paperboard and strawboard. The High Court has also referred to the circumstance that the process of manufacturing strawboard is identical with that of manufacturing paper. The expression paper and pulp in the Industries (Development and Regulation) Act includes paperboard and strawboard. Our attention has been drawn to the Entry relevant to the assessment year 1964-65 which speaks of paper and pulp including paper products and, it is said, strawboard is evidently not within the natural meaning of the word paper. We do not think that the submission merits serious consideration. Newsprint, paperboard and strawboard have been specifically mentioned in the entry in order to make it clear that they are included within the meaning of the word paper.
6. In our judgment, the High Court is right in taking the view which it has, and therefore, the appeals must be dismissed.
7. The appeals are dismissed with costs.
Appeals dismissed.
For Citation : AIR 1989 SC 1490
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