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Commissioner of Income-tax Vs. Bharat Ram Charat Ram P. Ltd. - Court Judgment

LegalCrystal Citation
Subject Direct Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Reference Cases Nos. 268 to 270 of 1975 and Surtax References Nos. 115 and 116 of 1974
Judge
Reported in[1987]163ITR861(Delhi)
ActsIncome Tax Act, 1961 - Sections 80E and 108; Companies (Profit) Surtax Act, 1964 - Rule 2
AppellantCommissioner of Income-tax
RespondentBharat Ram Charat Ram P. Ltd.
Excerpt:
.....surtax act, 1964, for the year 1964-65 and also for the year 1965-66 and held that the assessed is entitled to the relief accordingly. the ground was that the learned appellate assistant commissioner of income-tax had erred in not accepting the claim of the assessed that income derived from manufacture of super-enameled copper wire by electrical industries corporation, a firm in which the assessed was a partner, was from manufacture of an article which clearly fell amongst the articles specified in the statutory provisions for the entitlement of the rebate. the findings of fact recorded by the tribunal are thus clearly based on the material on record and cannot be termed as perverse......accepting the claim of the assessed that income derived from manufacture of super-enameled copper wire by electrical industries corporation, a firm in which the assessed was a partner, was from manufacture of an article which clearly fell amongst the articles specified in the statutory provisions for the entitlement of the rebate. no question of law as is argued by counsel was raised before the tribunal. the question posed for opinion, thereforee, has to be read and construed on the questions in issue before the tribunal. we are, thereforee not allowing counsel to pursue his arguments on this question. 11. the next submission of counsel for the department is that the findings of fact recorded by the tribunal are based on no evidence inasmuch as there was no evidence in support of the.....
Judgment:

S.S. Chadha, J.

1. These two sets of references raise common questions of law for the opinion of this court :

Questions in ITRs. Nos. 268 to 270 of 1975 :

'1. Whether, on the facts and the circumstances of the case and on a proper interpretation of items 6 and 16 of the List in Part IV of the First Schedule to the Finance Act, 1964, and of items 7 and 25 of the List in Part III of the First Schedule to the Finance Act, 1965, the assessed was entitled to rebate on its share of profits derived from Electrical Industries Corporation, for the. assessment years 1964-65 and 1965-66 respectively

2. Whether, on the facts and circumstances of the case and on a proper interpretation of items 7 and 24 of the Fifth Schedule to the Income-tax Act, 1961, the assessed was entitled to a deduction under section 80E on its share of. profits derived from Electrical Industries Corporation, for the assessment year 1966-67 ?'

3. Question in Surtax References Nos. 115 and 116 of 1974 :

'Whether, on the facts and circumstances of the case and on a proper interpretation of items 6 and 16 in rule 2 of Schedule III to the Companies (Profits) Surtax Act, 1964, the assessed was entitled to a rebate on the share income derived from Electrical Industries Corporation ?'

4. Surtax References Nos. 115 and 116 of 1974 arise out of the proceedings under the Companies (Profits) Surtax Act, 1964. The assessment years are 1964-65 and 1965-66 for which the relevant accounting periods were the calendar years 1963 and 1964. The assessed is a private limited company known as Bharat Ram Charat Ram (P.) Ltd. ITR. Nos. 268 to 270 of 1975 are for the assessment years 1964-65, 1965-66 and 1966-67 for which the relevant accounting periods were the calendar years 1963, 1964 and 1965. The assessed derives income from commission as managing agents of the Delhi Cloth & General Mills Ltd. (for short called 'the D. C. M.') and is also a partner in the firm known as M/s. Electrical Industries Corporation. This firm is engaged in the manufacture of super-enameled copper wire. For the three assessment years 1964-65 to 1966-67, the assessed claimed that its share of profits from M/s. Electrical Industries Corporation represented income attributable to the manufacture or production of any one or more of the articles specified in the lists found in the relevant portions of the Finance Act, 1964, 1965 and the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). Under these provisions, rebate of a specified amount was to be allowed on so much of the company's total income as was attributable to the business of manufacture or production of any one or more of the articles specified in the List in Part IV of the said Schedule. Items 6 and 16 of this List were relevant for the assessment year 1964-65 and read as under :

'6. Equipment for the generation and transmission of electricity including transformers, cables and transmission towers......

16. Component parts of the articles mentioned in items Nos. 4, 5, 6 and 8 that is to say, such parts as are essential for the working of the machinery referred to in items aforesaid and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose and are in complete finished form and ready for fitment.'

5. So far as the assessment year 1965-66 was concerned, a similar claim was made and the relevant provisions were found in Clause II of the First Proviso to paragraph F of the First Schedule of the said Finance Act. The relevant list of articles was given in Part III, the items concerned being items Nos. 7 and 25. The description under these items was identical as noted above for items Nos. 6 and 16 for the assessment year 1964-65.

6. For the assessment year 1966-67, the corresponding relief was provided in section 80E of the Act. This section was inserted by Act 13 of 1966 with effect from April 1, 1966, and was later omitted by Act 20 of 1967 with effect from April 1, 1968. This section read as under :

'80E. Deduction in respect of profits and gains from specified industries in the case of certain companies. - (1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company.

(2) This section applies to -

(a) an Indian company; or

(b) any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India,

but does not apply to any Indian company referred to in clause (a), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in section 108 and its total income as computed before applying the provisions of sub-section (l) does not exceed twenty-five thousand rupees.'

7. The assessed claimed that in respect of the share of income received by it from the partnership called Electrical Industries Corporation' which was engaged in the manufacture of super-enameled copper wire, it was entitled to a rebate of surtax as well in the computation of the company's total income as was attributable to the business of manufacture or production of super-enameled copper wire. The claim of the assessed was ignored by the Surtax Officer as well as by the Income-tax Officer. On appeals, the concerned Appellate Assistant Commissioner came to the conclusion that the assessed was not entitled to the rebate claimed. The assessed preferred appeals to the Tribunal claiming rebate of surtax in the concerned appeals and rebate in the computation of total income also in the concerned appeals.

8. The Tribunal heard the two appeals under the Companies (Profits) Surtax Act, 1964, and delivered the order on May 30, 1973. The Tribunal came to the finding of fact that the super-enameled copper wire produced by the firm constitutes a basic material required in connection with the generation of electricity and transmission thereof, that such wires are used in electrical generators, motors and transformers, that the super-enameled wire manufactured by the firm is a component part in various items of equipment used in the generation and transmission of electricity, that the super-enameling done to the copper wire is only with a view to make it fit for being utilised in transformers and other equipment for the generation and transmission of electricity and that this process would not be essential for the use of copper wire for any other purpose. The Tribunal further expressed that the product manufactured by the assessed is also in a completely finished form and it is ready for fitment into other electrical equipment without any further processes being necessary thereforee. With this finding of fact, the Tribunal held that the items manufactured by the assessed clearly fell within the scope of item 16 read with item 6 of the III Schedule to the Companies (Profits) Surtax Act, 1964, for the year 1964-65 and also for the year 1965-66 and held that the assessed is entitled to the relief accordingly.

9. In the three appeals against the income-tax assessments, the Tribunal placed reliance on the order of the Tribunal in the assessed's own case in its surtax assessments for the years 1964-65 and 1965-66 under the Surtax Act. Following with respect the decision of the Tribunal in surtax assessment, the Tribunal held that the assessed is entitled to the relief in question. The Income-tax Officer was directed to quantify the computation of tax accordingly for the year concerned.

10. The first submission of Shri K. K. Wadhera, learned counsel for the department is that the statutory provisions allow deductions in respect of profits and gains from specified industries in the case of certain companies. It is urged that the assessed's claim for the two years was that in respect of its share income from the firm M/s. Electrical Industries Corporation, it was entitled to a rebate of surtax. The assessed itself is not engaged in the manufacture of super-enameled copper wire and, thereforee, does not come within the statutory provisions. In our opinion, no such question of law arises out of the Tribunal's order. A question of law can be said to arise out of the Tribunal's order if it is dealt with by the Tribunal or is raised before it though not decided. The assessed was the appellant before the Tribunal. The ground was that the learned Appellate Assistant Commissioner of Income-tax had erred in not accepting the claim of the assessed that income derived from manufacture of super-enameled copper wire by Electrical Industries Corporation, a firm in which the assessed was a partner, was from manufacture of an article which clearly fell amongst the articles specified in the statutory provisions for the entitlement of the rebate. No question of law as is argued by counsel was raised before the Tribunal. The question posed for opinion, thereforee, has to be read and construed on the questions in issue before the Tribunal. We are, thereforee not allowing counsel to pursue his arguments on this question.

11. The next submission of counsel for the department is that the findings of fact recorded by the Tribunal are based on no evidence inasmuch as there was no evidence in support of the fact that super-enameled copper wire is an equipment for the generation and transmission of electricity including transformers, cables and transmission towers or for the component parts of the said articles. In our opinion, this court has no jurisdiction to go behind or question statement of facts made by the Tribunal in its appellate order or the statement of the case. This court cannot disturb or go behind any finding of fact given by the Tribunal even on the ground that there is no legal evidence to support it, unless it has been first expressly challenged by a question raised in the reference application. In this case, there was material before the Tribunal to come to a finding of fact noticed above while extracting the Tribunal's order. There was also a technical note given by Shri T. R. Gupta, former Chairman of Heavy Engineering Corporation. It stated, inter alia, that super-enameled wires, paper and cotton covered wires and winding wires fall under the priority industry as they are the basic materials required for the equipment for generation of electricity and transmission of electricity including transformers and that winding wires are used in electrical generators, motors and transformers. The report also contained the opinion regarding the technical difference between wire and cable. The findings of fact recorded by the Tribunal are thus clearly based on the material on record and cannot be termed as perverse. The Tribunal recorded the finding that the super-enameling was done to make copper wire only with a view to fit, utilise and transfer other equipments for the generation and transmission of electricity and this process would not be essential for the use of copper wire for any other purpose. Great stress is laid by counsel on the words 'for no other purpose' used in the statutory provisions. There is a clear finding of fact in this regard. If the finding of fact recorded was against the records, other courses were open to the department, for example, it could go in for rectification of the order or even highlight the points in the reference petition. No such course having been adopted by the Department, the finding recorded in the statement of case has to be adopted for answering the reference.

12. We, thereforee, answer the references against the Revenue and in favor of the assessed with no order as to costs.


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