Commissioner of Income Tax vs Kurien Abraham (P.) Ltd.

V.V. Kamat, J.—The assessee-company, Messrs. Kurien Abraham (P.) Limited, has installed a centrifuging machine and had claimed investment allowance thereon which was not allowed by the assessing authority. The assessee is engaged in the business of centrifuging latex and the question before the assessing authority was as to whether this involves any manufacturing-activity or not. The assessing authority answered the question in the negative.

The Commissioner of Income Tax (Appeals) held otherwise and by his order (annexure "B") directed the Income Tax Officer to grant investment allowance and apply the rate applicable to manufacturing companies.

Against this decision, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. Initially, by an order dated February 3, 1995, for "statistical purposes" the said appeal was decided and it was taken up for reposting, on the application of the assessee when the Tribunal was satisfied with the reasons preventing the assessee to appear before the Tribunal.

Even though the appeal was disposed of "for statistical purposes", with regard to the question as to whether the business of centrifugal latex amounts to manufacturing activity was taken by the Tribunal in the said order.

Therefore, even after deciding to rehear the appeal, the Tribunal, by the impugned order (annexure "C") with regard to the question preferred to rely on the said order dated February 3, 1993, not finding any reason to depart from the reasoning in regard thereto.

The Revenue preferred an application for reference before the Income Tax Appellate Tribunal (annexure "D") with a request to make a reference to this court in regard to the following four questions :

" 1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to investment allowance ?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that ''the activity of the assessee-company is one of manufacturing'' and is not the above finding wrong, unsustainable in law and facts ?

Whether, on the facts and in the circumstances of the case and also in the light of the decision reported in Commissioner of Income Tax Vs. Woodland Estates Ltd., , the Tribunal is right in law and fact in holding that the activity of the assessee-company is one of manufacturing ?

Whether, on the facts and in the circumstances of the case, the assessee is an industrial company ?"

Reading the above questions it would be at once seen that the first three questions would depend on the answer to the question as to whether the activity of the assessee-company is one of manufacturing. However, question No. 4 raises a contention that the assessee is an industrial company.

Factually it must be carefully seen that before all the three authorities--assessing authority, first appellate authority, Commissioner of Income Tax (Appeals) as well as the Income Tax Appellate Tribunal, the question that was raised and that came up for consideration got concentrated to the position whether the activity of the assessee-company is one of manufacturing or not and its consequences.

Another thing that floats on the surface of the record is that the statement of facts (annexure "D-3") also speaks about the solitary question urged therein that the assessee is not engaged in any manufacturing or processing goods. Question No. 4 cannot be spelt out even by a whisper from the statement of case of the Revenue in support of the application for reference before the Income Tax Appellate Tribunal.

Even if we consider this aspect of question No. 4 with an attitude of a liberal approach, by referring to the said statement of facts, it is possible to read the penultimate paragraph of the statement of case that the Revenue does not accept the decision of the Income Tax Appellate Tribunal to apply the rate of tax prescribed to manufacturing companies making out a ground for raising question No. 4. The position would not be different altogether.

Learned counsel for the assessee brought to our notice paragraph 4 of the impugned order of the Tribunal in relation to the contention to tax the assessee at concessional rate applicable to the industrial company in regard to which the Tribunal has observed that there is no reason to interfere in view of the reasoning in regard thereto in the earlier order dated February 3, 1993. On reference to the said reasoning which is to be found in paragraph 4 of the said order, copy of which is made available to us, it is seen that the Tribunal has agreed with the view of the appellate authority because the Tribunal had already held that the assessee is a manufacturing company being entitled for investment allowance. Thus, once when the assessee is understood as a manufacturing company being entitled to investment allowance the consequence that follows is that the assessee is required to be taxed at the rate prescribed for industrial company.

Learned senior counsel for the Department firstly, with regard to the main question as to whether the activity of the assessee-company is one of manufacturing was characteristically fair because the very question came up before us in Original Petitions Nos. 5471 of 1995 and others dated February 12, 1996-- Commissioner of Income Tax Vs. Kanam Latex Industries P. Ltd., to lead us to the conclusion, after taking into consideration the process known as centrifuging latex and the relevant decisions in regard thereto including the decision of the Constitution Bench of the Supreme Court in Ujagar Prints v. Union of India : [1989]179ITR317(SC) emphasising commerciality as the determining factor in regard to a claim for deduction in the context and a consequent factual conclusion that the activity of centrifuging latex would be nothing other than the commercial activity and therefore was fair enough to realise the situation on merits in regard thereto. We also find that with regard to the main question spelt out hereinbefore the situation would not be otherwise than the one already considered and decided by us as stated hereinbefore.

Learned counsel then submitted that the Tribunal acted beyond the ambit of its judicial powers in relying on the earlier order, stated above, dated February 3, 1993, which was recalled by itself. It is contended that once the order is recalled there is no jurisdiction to place reliance thereon in the next breath. It is for this reason that we have carefully considered the situation in the context. The order dated February 3, 1993, partly allowed the appeal of the Revenue for statistical purposes and it was again taken up from file for giving an opportunity to the assessee for participating in the process he was justifiably prevented from attending on the day in which the appeal was heard earlier. It is to be noted that the Tribunal did not feel to change its view even after hearing the assessee. In fact the question was really pending before this court in the matter of the assessee therein Kanam Latex Industries P. Ltd. It would be seen from the order of the first appellate authority that the said question was then decided by the Cochin Bench in the matter of the said assessee, Kanam Latex Industries Pvt. Ltd. The real question is whether there is an error of a jurisdictional character attributable to the Tribunal in the impugned order in placing reliance on its earlier order which was recalled under the above circumstances. Taking into consideration the factual matrix referred to above we do not find any error when the Tribunal has observed that there was no reason to interfere with the view taken earlier, in view of the position that the earlier order was recalled to enable the assessee to put forth contentions on his behalf.

Learned senior counsel then urged that although the first three questions are virtually and neatly covered by the decision of this court dated February 12, 1996- Commissioner of Income Tax Vs. Kanam Latex Industries P. Ltd., , the Tribunal was legally duty bound to consider question No. 4.

As stated above the position of record is such that the said question is not required to be independently taken up for consideration. We have stated that not only that the statement of facts in support of the application for reference represents whispering vagueness, but we further find that when the only question is answered that the assessee carries on the business of centrifuging latex which amounts to manufacturing activity, as discussed by the Tribunal, in the impugned order at paragraph 4 as a consequence the direction to tax the assessee at concessional rate applicable to industrial company is a matter of legal consequence because the assessee in spite thereof would continue to be an industrial company according to law.

For the above reasons, we do not find any ground for interference with the order of the Tribunal. The petition, therefore, stands dismissed.