Rattnder Nath Mittal, J.
1. The facts which have given rise to these income-tax references are as follows :
The assessee manufactures straw-board. The relevant assessment years are 1965-66, 1966-67 and 1967-68. The assessee claimed concessional rates of income-tax, development rebate at a higher rate and deduction under Section 80E of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), in respect of profits and gains on the ground that the manufacture of straw-board was a priority industry. For the calendar year 1964 relevant to the assessment year 1965-66, the total income was assessed at Rs. 17,71,334 and against the basic rate of 80% the company claimed rebate at the rate of 35% up to Rs. 10,00,000 and on the balance at 26% but the Income-tax Officer allowed rebate at 30% up to Rs. 10,00,000 and 20% on the balance. For the calendar year 1965 relevant to the assessment year 1966-67, the assessee claimed development rebate under Section 33 of the Act at the rate of 25% on the value of the machinery installed after April 1, 1965, worth Rs. 34,287 against which the rebate was allowed at 20%. The assessee-company also claimed benefit under Section 80E which was inserted by the Finance Act, 1966, with effect from April l, 1966, to the extent of its income determined by the Income-tax Officer at Rs. 8,17,485 received from the manufacture of straw-board. This industry falls under item No. 16 mentioned in the Fifth Schedule to the A,ct as substituted by the Finance Act of 1965. The claim of the company was negatived by the Income-tax Officer, For the year 1966, relevant to the assessment year 1967-68, the total income of the company was determined at Rs. 11,00,885. It claimed that it was entitled to the relief provided under Section 80E to the extent of Rs. 7,50,316 which was derived from the manufacture of straw-board. The Income-tax Officer did not accept the contention of the company that it was a priority industry. He held that manufacture of straw-board was not covered by the words 'paper and pulp' in the respective schedules of the assessment years 1966-67 and 1967-68. The company having felt aggrieved against the orders of the Income-tax Officer filed appeals before the Appellate Assistant Commissioner who affirmed the findings of the Income-tax Officer. It went up in further appeals to the Income-tax Appellate Tribunal, Chandigarh, against those orders for all the assessment years. It accepted the assessee's plea that the manufacture of straw-board was a priority industry and that it was entitled to the statutory rebates as claimed. The department filed applications to the Tribunal for referring the following questions to this court under Section 256(1) of the Act which were allowed :
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 'straw-board' 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 'straw-board' 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 assessee's claim under Section 80E of the Act ?'
2. This is how the matter has come before us.
3. The learned counsel for the parties have referred to Sections 33 and 80E of the Act as they existed during the relevant assessment years. Section 33 relates to development rebate and Section 80E to deduction in respect of profits and gains from specified industries in case of certain companies. In both the Sections, reference has been made to the Fifth Schedule of the Act. That Schedule was substituted by the Finance Act, 1965. The relevant entry to which reference has been made by the learned counsel for the parties is No. 16 which is as follows :
'Paper and pulp '.
4. This item was amended by the Finance Act, 1966, and the words 'including newsprint' was added after the word 'pulp'. Thus the amended entry is as follows I
'Paper and pulp including newsprint '.
5. The sole question for determination is as to whether the industry relating to manufacture of straw-board falls within the definition of industry of 'paper and pulp'. The word 'paper' has not been defined in the Act. It has been observed by their Lordships of the Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer : 1SCR279 , that the words occurring in a taxing statute must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It is further observed that they must be construed in their popular sense meaning that sense which people conversant with the subject-matter with which the statute is dealing would attribute to them. The question before their Lordships of the Supreme Court was whether the betel leaves were vegetables or not. Applying the aforesaid test, the learned judges held that they were not included in the definition of vegetable. This view was followed by that court in Sarin Chemical Laboratory v. Commissioner of Sales Tax : 1SCR731 and Commissioner of Sales Tax v. S.N. Brothers : 2SCR852 . In S. N. Brothers' case the question for determination was as to how the words 'dyes and colours' and 'scents and perfumes' as occurring in U.P. Sales Tax Act, 1948, were to be interpreted. It was observed by the learned judges as follows :
'The words 'dyes and colours' used in entry No. 10 and the words 'scents and perfumes' used in entry No. 37 have to be construed in their own context and in the sense, as ordinarily understood and attributed to these words by people usually conversant with and dealing in such goods.'
6. From a reading of the aforesaid cases, it is clear that in order to decide as to what 'paper' means, we have to see how it is understood by the people who are conversant with and dealing in such goods.
7. In order to determine this matter, it is necessary to be seen as to how industries relating to paper and straw-board are understood in the industrial world and to which use both the items are put. There is specific mention in the licence dated May 31, 1954, issued to the company that the industrial undertaking of the company was registered in terms of Section 10 of the Industries (Development and Regulation) Act, 1951 (hereinafter referred to as 'the Industries Act'). The details given in the licence are as follows:
'Schedule Industry (21) including newsprint, paper-board and straw-board.'
8. The process of manufacture of straw-board is identical to that of manufacture of paper. The only difference is that the straw-board machine runs at a slow speed on account of thickness of the end product whereas the paper machines are fast running. The manufactured paper is ordinarily thin and fine whereas the straw-board is thick and rough. The applications for import licences for machinery and other accessories of straw or card board mills are channelled through the Pulp and Paper Directorate. A reference has been made to the Industries Act in the Fifth Schedule of the Act, and in the Finance Acts relating to the relevant years. In the Industries Act, item No. 24 of the First Schedule is as follows :
'24. Paper and pulp including paper products:
(1) Paper--writing, printing and wrapping.
(3) Paper-board and straw-board,
(4) Paper for packaging (corrugated paper, kraft paper, paper bags, paper containers and the like).
(5) Pulp--wood pulp, mechanical, chemical, including dissolving pulp.'
9. From the aforesaid entry, it is clear that the paper and pulp includes paper-board and straw-board. It can, therefore, be safely deduced from the above facts that the persons who manufacture paper 'understood that paper includes paper-board and straw-board. The licence which was granted to the company also shows that it, had to manufacture paper which included newsprint, paper-board and straw-board. Straw-board is ordinarily used for packing. A packing material can very well be included in the definition of paper. A similar question came up before a Division Bench of the Allahabad High Court in Kores India. Ltd. v. State of Uttar Pradesh . It arose under the Uttar Pradesh Sales Tax Act, 194.8. The question was whether carbon paper was a 'paper' or not. The learned Bench observed that, in the ordinary sense, paper refers generally to the material used for writing, printing or wrapping. The Bench, after applying the aforesaid test, held that the carbon paper could not be considered to be a 'paper' in that sense. Such a question also came up before another Bench of that High Court in Kilburn & Co, Ltd. v. Commissioner of Sales Tax . There the question was whether ammonia paper and ferro paper used for obtaining prints and sketches of site plans were not paper as understood generally. The learned Bench observed that the word 'paper' has not been denned in the Act or the Rules and, as such, it has to be given the meaning which it has in ordinary parlance. 'Paper', asunderstood in common parlance, is the paper which is used for printing, writing and packing purposes. The learned Bench held that ammonia paper and ferro paper used for obtaining 'prints and sketches of site plans were not 'paper'. From the aforesaid cases, it is evident that the material which is used for wrapping and packing is included in the word 'paper'' The straw-board, as already observed, is ordinarily used for the purposes of packing. The word 'paper', in oar opinion, includes straw-board as understood by persons who are conversant with dealing in such goods. There is another way of examining this question. The Industries Act has been referred to in several provisions of the Act. Therefore, in orderto know the intention of the legislature as to what paper industry is, assistance can be taken from the Industries Act. It has been observed by Maxwell on the Interpretation of Statutes (twelfth edition), at page 66, as follows:
'Where there are different statutes in pari materia, though made at different times, or even expired and not referring to each other, they shall be taken and construed together, as one system and as explanatory to each other.'
10. Reference in this connection may be made to item No. 4 of the Fifth Schedule, which is as follows :
'Industrial machinery specified under the heading 8, Industrial machinery', sub heading 'A. Major items of specialised equipment used in specific industries', of the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951).'
11. In case item No. 24 of the First Schedule of the Industries Act is taken into consideration for interpreting 'paper', it is clear that strawboard is included in paper.
12. The learned counsel for the department argues that in item No. 4, reference has been made to Industries Act and in case paper had to include straw-board, item No. 16 would have referred to item No. 24 uf Schedule I of the Industries Act. We are unable to accept this contention of the learned counsel for the department. As we have already observed, the benefit of item No. 24 of Schedule I of the Industries Act goes to the company. It was not necessary for the legislature that in every item, reference should have been made to the Industries Act.
13. The learned counsel for the department then argues that Section 56A of the Indian Income-tax Act, 1922, which relates to exemption from super-tax of certain dividends, refers to, inter alia, the company which is engaged in industry for manufacture of 'paper including newsprint and paper-board'. He further submits that in the Act as originally framed, item No. 9 of Part 'A' of the Fifth Schedule has been given as 'paper including newsprint and paper-board'. He has then referred to the Fifth Schedule as it existed at the relevant time wherein item No. 16 v/as 'paper and pulp'. It is then submitted by him that the Schedule was amended later on and the words 'including newsprint' were added in item No. 16 after the word 'pulp'. Referring to the aforesaid changes, he argues that the intention of the legislature was clear that it did not want to include straw-board within the aforesaid entry. This contention we have examined at considerable length but do not find any substance in it. Section 56A of the 1922 Act and Section 99 of the Act as originally framed, in which the Fifth Schedule was referred to, related to super-tax. Super-tax has been abolished. Section 99 has also been repealed. The learned counsel for the department cannot derive any help from the aforesaid two Sections and entries thereunder. The amendment of item No, 16 in the year 1966 by addition of the words 'including newsprint' also does not help the department. Addition of the aforesaid words to this item would not limit its meaning but extend the same. It has been observed by Maxwell in the aforesaid treatise at page 270 :
'Sometimes, however, the word 'include' is so used in order to enlarge the meaning of words or phrases occurring in the body of the statute ; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. In other words, the word in respect of which 'includes' is used bears both its extended statutory meaning, and 'its ordinary, popular, and natural sense ' whenever that would be properly applicable.'
14. By adding the word 'newsprint' to item No. 16, it cannot be said that 'newsprint' was not included in the word 'paper'. It appears that, in order to clarify the matter, the word 'newsprint 'was added to it. By including the word 'newsprint' in the item, we cannot hold that other types of papers which were included in it, have been excluded. This principle finds support from the observations of the Supreme Court in Commissioner of Gift-tax v. N. S. Getti Chettiar : 82ITR599(SC) , wherein it was held as follows :
'......an interpretation clause which extends the meaning of a word does not take away its ordinary meaning. An interpretation clause is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act, when there is nothing in the context or the subject-matter to the contrary, to be applied to some things to which it would not ordinarily be applicable.'
15. Even if both the interpretations--one put by the learned counsel for the company and the other by the learned counsel for the department--are taken to be correct, it is the principle of interpretation that the interpretation which is favourable to the subject should be adopted and that which is favourable to the department should be discarded. In case that principle is applied to the present case, the interpretation which supports the assessee has to be accepted.
16. For the aforesaid reasons, we are of the opinion that the conclusions arrived at by the Income-tax Appellate Tribunal are correct. We, therefore, answer the question in the affirmative, that is, in favour of the asses-see. In the circumstances of the present case, we make no order as to costs.
Prem Chand Pandit, J.
17. I agree.