Commissioner of Income Tax vs Maharashtra Extraction Pvt. Ltd.

D.R. Dhanuka, J.—The Income Tax Appellate Tribunal, Pune Bench Pune, has referred the following question to this court u/s 256(1) of the Income Tax Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Commissioner of Income Tax (Appeals) that on the merits of the case section 104 was not applicable to the assessee-company ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the finding of the Commissioner of Income Tax (Appeals) that section 104 was not applicable to the assessee-company in view of the provisions of section 104(4) relying upon the Tribunal decision in Income Tax Appeal No. 289/(PN) of 1977-78, dated September 23, 1978, in the assessee''s case which has not become final ?"

The assessee carries on business of extracting deoiled cake and oil. The assessee does not own a solvent plant but has taken a solvent plant on lease owned by the Maharashtra Oil Industries. The relevant assessment year is the assessment year 1975-76. The Commissioner of Income Tax passed an order u/s 263 of the Act holding that the assessee-company could not be considered as an industrial company. By the said order, the Commissioner of Income Tax directed the Income Tax Officer to reframe the assessment and tax the assessee as a non-industrial company. By an order dated September 23, 1978, the Income Tax Appellate Tribunal held that the assessee-company was an industrial company within the meaning of section 2(8) (c) of the Finance Act, 1975. The expression "industrial company" under the said Act is defined as under :

"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 processing of goods or in mining."

The Income Tax Appellate Tribunal held in Income Tax Appeal No. 289/(PN) of 1977-78 that the assessee need not own a solvent plant by itself and the assessee herein was liable to be considered as an industrial company in view of the fact that the assessee was engaged in the manufacture or processing of goods although the solvent plant was taken by the assessee on lease from the Maharashtra Oil Industries.

By an order dated March 23, 1978, the Income Tax Officer passed an order u/s 104 of the Income Tax Act, 1961, on the footing that the assessee was not engaged in the manufacture of goods and section 104(4) of the Act was not applicable. By an order dated December 12, 1978, the Commissioner of Income Tax (Appeals), Pune, rightly held that the Income Tax Officer was in error in applying section 104 to the case of the assessee in view of the provisions contained in section 104(4) of the Income Tax Act. If the assessee was an industrial company, as in fact it was, within the meaning of the said expression used in section 2(8) (c) of the Finance Act, 1975, section 104(4) of the Income Tax Act, 1961, was clearly attracted. Section 104(4) of the Income Tax Act provides that section 104 of the Act is not applicable to company which is engaged in the manufacture or processing of goods. The Income Tax Appellate Tribunal upheld the order of the Commissioner of Income Tax (Appeals) for the same reason. The Income Tax Appellate Tribunal rightly relied on the earlier order of the Tribunal passed on September 23, 1978, in Income Tax Appeal No. 289/(PN) of 1977-78.

There is no merit whatsoever in the contention of the Revenue that the assessee is not an industrial company or that the case of the assessee is not covered u/s 104(4) of the Income Tax Act.

In this view of the matter, we answer the questions referred to us as under :

(i) Question No. 1 is answered in the affirmative and against the Revenue.

(ii) Question No. 2 is also answered in the affirmative and against the Revenue.

Having regard to the facts and circumstance of the case, there shall be no order as to costs.