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Chemicals and Fibres of India Ltd Vs. M.K.N. Pillai and Another - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberMiscellaneous Petition No. 528 of 1976
Judge
Reported in(1983)32CTR(Bom)97; [1984]146ITR280(Bom)
ActsIncome Tax Act 1961 - Sections 80-I and 147
AppellantChemicals and Fibres of India Ltd
RespondentM.K.N. Pillai and Another
Excerpt:
.....may be set out :if the assessee had at any time brought to the notice of the ito that its products are in fact manufactured from the basic raw material, di methyl torythalate, the claim of the assessee would not have been accepted as this raw materials is not like calcium carbide, ethyl alcohol or hydrocarbons from other sources. it is also further learnt that the raw material used by the assessee for the manufacture of polyster fibre is only an intermediate product form crude oil and the assessee manufactured polyster fibre which is neither a petrochemical nor a product manufactured from other basic raw materials like calcium carbide, ethyl alcohol or hydrocarbons. 4469 (bom)/73- 74. it has been brought to our attention by the assessee's learned counsel that the reference sought for..........for the manufacture of polyster fibre is only an intermediate product form crude oil and the assessee manufactured polyster fibre which is neither a petrochemical nor a product manufactured from other basic raw materials like calcium carbide, ethyl alcohol or hydrocarbons. thus, the assessee has not disclosed fully and truly all the material facts necessary for its assessment on the basis of which the above deduction u/s. 80i and extra development rebate u/s. 33 of the i.t. act, 1961, of rs. 13,40,240 and rs. 9,02,920, respectively, were incorrectly granted.'3. mr. dwarkadas has drawn my attention to the decision given by the supreme court of india in cit v. nirlon synthetic fibres and chemicals ltd. : [1981]130itr14(sc) , and another judgment in the same volume at page 23, j. k......
Judgment:

S.K. Desai, J.

1. In this writ petition the assessee, which is a public limited company, seeks to quash several notices dated 4th March, 1976, issued u/s. 148 read with s. 147 of the I.T. Act, 1961, and similar notices issued u/s. 8 of the Surtax Act. Consequential relief is also sought.

2. It would appear from the annexure to the affidavit-in-reply of the ITO, Company Circle VI(5), Bombay, that the assessee-company had claimed deduction u/s. 80I and extra development rebate u/s. 33 of the I.T. Act, 1961, on the ground that manufacture of polyster fibre was an activity covered by item No. 18 of the Fifth and Six Schedules to the I.T. Act. The original ITO dealing with the assessee accepted the said claim of the assessee and completed the assessment. Item 18 mentions 'Petrochemicals including corresponding products manufactured from other basic raw materials like calcium carbide, ethyl alcohol or hydrocarbons from other sources'. In 1976 the successor-ITO of the said circle came to the conclusion that his predecessor had accepted the assessee's claim without making proper inquiry. In his opinion the assessee was required to bring to the notice of the said ITO what it manufactured, the process of manufacture and the raw material from which the fibre was manufactured. The relevant portion of the report made by the ITO to the Commissioner may be set out :

'If the assessee had at any time brought to the notice of the ITO that its products are in fact manufactured from the basic raw material, Di Methyl Torythalate, the claim of the assessee would not have been accepted as this raw materials is not like calcium carbide, ethyl alcohol or hydrocarbons from other sources. It is also now ascertained that the assessee does not manufacture petrochemicals. It is also further learnt that the raw material used by the assessee for the manufacture of polyster fibre is only an intermediate product form crude oil and the assessee manufactured polyster fibre which is neither a petrochemical nor a product manufactured from other basic raw materials like calcium carbide, ethyl alcohol or hydrocarbons. Thus, the assessee has not disclosed fully and truly all the material facts necessary for its assessment on the basis of which the above deduction u/s. 80I and extra development rebate u/s. 33 of the I.T. Act, 1961, of Rs. 13,40,240 and Rs. 9,02,920, respectively, were incorrectly granted.'

3. Mr. Dwarkadas has drawn my attention to the decision given by the Supreme Court of India in CIT v. Nirlon Synthetic Fibres and Chemicals Ltd. : [1981]130ITR14(SC) , and another judgment in the same volume at page 23, J. K. Synthetics Ltd. v. CIT. He has also pointed out that for the assessment years 1969-70 and 1970-71 the Income-tax Appellate Tribunal has upheld the claim of the very same assessee (the petitioner-company) for relief under s. 80I and higher development rebate applying the principles enunciated by the Supreme Court in the Nirlon case : [1981]130ITR14(SC) . This is in Income-tax Appeal No. 2609 for the assessment year 1970-71.

4. He has also drawn my attention to the order passed in Reference Application No. 1319 of 1977-78 arising from the said appeal. In paragraph 4 of the order rejecting the application, the Judicial Member has observed as under :

'It is seen from the order of the Tribunal that the Tribunal in accepting the assessee's claim and upholding the order of the Appellate Assistant Commissioner on the merits regarding the assessee's eligibility to relief under section 80I of the Act has followed other orders of the Tribunal, for instance, in the case of Nirlon Synthetic Fibres & Chemicals Ltd., in I.T. A. No. 4469 (Bom)/73- 74. It has been brought to our attention by the assessee's learned counsel that the reference sought for by the Revenue in that case has been rejected by the Tribunal and a further attempt by the Revenue to get a direction from the High Court to the Tribunal to state the case was also unsuccessful. This is not disputed by the learned departmental representative.'

5. It is clear that the assessee had made a claim on the footing which has been accepted by several judicial tribunals. It had disclosed the primary facts which were necessary for the purpose of making the assessment. If there was any doubt, it was for the concerned officer to make further inquiries. It is impossible to hold or accept the conclusion that the assessee had failed to disclose fully or truly the necessary material facts or had thereby caused the ITO to erroneously accept its claim u/s. 80I and for higher development rebate. If that be my conclusion, it must follow that the action taken u/s. 148 read with s. 147 of the I.T. Act is improper, incompetent and the notices issued are required to be quashed. Similar result would follow in respect of notices under the Surtax Act.

6. In the result, the rule is made absolute in terms of prayers (a) and (b). Parties to bear their own costs.


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