1. These two appeals by the assessee are directed against the order of CIT, Meerut, passed under s. 263 of the IT Act, 1961 (hereinafter called the Act) and relate to the asst. yrs. 1991-92 and 1992-93.
2. The solitary issue neatly identified by O. P. Vaish, is in relation to the re-examination of issue apropos the denial of deduction contemplated under s. 80-I of the Act on the ground that the item manufactured by the assessee-company comes within the ken of the Eleventh Schedule of the Act, by resorting to the provisions of s. 263 of the Act.
"The assessee-company was granted licence for the manufacturing of "Xerographic equipment and systems" coming under the head "High technology reproduction and multiplication equipment". It was engaged in the manufacturing of xerographic machinery, toner, developer and photoreceptor. It was also engaged in the servicing activities.
On examining the facts and circumstances of the case, CIT found that conditions precedent for assuming jurisdiction under s. 263 of the Act did exist inasmuch as the item manufactured by the assessee-company was within the ambit of item No. 22 of Sch. XI of the Act. Item 22 of Sch. XI, reads as under : "Office machines and apparatus such as typewriters, calculating machines, cash registering machines, cheque writing machines, intercom machines and teleprinters." Explanation : The expression "office machines and apparatus" includes all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and for data processing (not being computers within the meaning of s. 32AB)." 4. According to the CIT, AO did not consider this point inadvertently.
He did not examine the merits of the case. He allowed deduction to the assessee under s. 80-I of the Act. Sec. 80-I benefit is available to the assessee if its profits and gains are derived from industrial undertaking which manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule This condition is laid down under s. 80-I (2) (iii) of the Act. According to the CIT, Xerographic machine is office equipment.
Office equipment is listed in Eleventh Schedule The order of the AO, therefore, in allowing deduction under s. 80-I was erroneous and prejudicial to the interest of the Revenue. He, therefore, set aside the order passed by the AO with direction to re-examine the entire issue in detail.
5. At the time of hearing, assessee made a request for admission of additional evidence under r. 29 of the ITAT Rules, 1963. Letter dt.
25th Jan., 1984, signed by the secretary, CBDT, was placed before us.
This reads as under : "I am directed to say that high technology reproduction and multiplication equipment does not come within the Sch. XI to the IT Act, 1961. However, it will be for the claimant of the investment allowance to satisfy the IT authorities that the item of manufacture falls within the description "high technology reproduction and multiplication equipment".
6. O. P. Vaish along with Ajay Vohra, appeared on behalf of the assessee. Relevant documents and papers were filed. It was vehemently contended that conditions precedent for assuming jurisdiction under s.
263 of the Act did not exist. The order of the AO was neither erroneous nor prejudicial to the interest of the Revenue. The items manufactured by the assessee-company are beyond the ambit of Sch. XI of the Act. The item manufactured by the assessee being xerographic equipment and systems comes under the head "high technology reproduction and multiplication Equipment" (Serial No. 20 of Appendix to Government of India, Press Note dt. 21st April, 1982). According to the learned counsel item No. 22 of Sch. XI cannot be so read as to include xerographic equipments and systems. Our attention was invited on the harmonised commodity description and coding system, commonly known as "Harmonised System of Nomenclature (HSN) issued by World Customs Organisation, Brussels. Reference was made to the decision of CCE Shillong vs. Woodcraft Products Ltd. 77 ELT 23 (SC) wherein it was held that HSN is a safe guide for ascertaining the true meaning of an expression used in the Act unless there a different intention is expressed. It was contended that the items in Sch. XI are lifted verbatim from HSN and, therefore, the same should be referred to explain their content.
7. It was brought to our notice that item No. 22-office machines and apparatus are listed as including "typewriters being item 84.69 of s.
XVI of HSN, "calculating machines" and "cash registering machines" being item 84.70 of s. XVI of HSN, "cheque writing machines" being sub-item 18 of main head 84.72 of s. XVI of HSN, "intercom machines" and "teleprinters" being classified in item 85.17 of s. XVI of HSN.8. It was submitted that the assessee's item of manufacture, i.e., xerographic equipment, popularly known as photocopying machine, figures in a separate s. XVIII and a separate item 90.09 which has nothing to do with office machines and apparatus. Therefore, item 22 of XIth Schedule cannot cover assessee's item of manufacture.
9. The Expln. to item 22 in Sch. XI further qualifies the expression "office machines and apparatus" to include all machines and apparatus used in offices, etc. ......... for doing office work. The expression "office work" is described in HSN as work concerning the writing, recording, sorting, filing of correspondence, documents, forms, records, accounts, etc.
10. The learned counsel described the functional use of the xerographic equipment. It was stated that the machine can be used by students, teachers, professors, researchers, artists, graphic designers, printers, householders, etc. These functions of the machine cannot be described as use for the doing the office work.
11. It was further contended that the assessee has three income generating streams, namely : The benefit under s. 80-I was claimed on the first two industrial undertakings in respect of which assessee holds distinct and separate industrial licences. By no stretch of imagination, industrial undertaking engaged in the manufacture of toner and developer can be considered as engaged in manufacturing of office machines and apparatus as referred to in item 22 of Sch. XI.12. In the asst. yr. 1992-93 although the show cause notice referred only to item 22, the CIT has stated that the item of manufacture by the assessee could be covered even in item 10 of Sch. XI. According to the learned counsel item 10 of Sch. XI speaks of "photographic apparatus and goods". This is totally different from xerographic equipment and system. Photographic apparatus are covered in item 90.06 in HSN whereas photocopying apparatus incorporating an optical system is under a separate head in item 90.09. Photographic equipment is an altogether different technology compared to photocopying equipment that incorporates on optical system. Even the toner and developer used in photography is an item of manufacture different from the one used in a xerographic equipment. It is produced in powder form for photocopying which cannot be used for photography.
13. In item 90.06 dealing with photographic equipment and goods, it is specifically stated that this head excludes photocopying apparatus which is part of heading 90.09. Learned counsel submitted that similar support is found in the depreciation of items under the excise traffic, custom tariff and ITC (HS) classification of Export and Import items.
On that basis it was argued that assessee's item of manufacture is not covered by item 22 or 10 of Sch. XI.14. Learned counsel also made a reference to the industrial licencing policy as it applied at the time when the assessee was granted the licence to manufacture xerographic equipment and system. In order to curtail the concentration of economic power Government put severe restrictions on the MRTOP and FERA companies from engaging in any item of manufacture or for expanding capacity in the existing item of manufacture without an industrial licence. The MRTP and FERA companies were allowed to secure a licence for manufacture of only items listed in the Appendix to the Schedule to Industrial Development and Regulation Act. A press-note was issued by the Government of India, on 21st April, 1982. It was stated in para 7 of that press-note, that for industrial growth, the CORE sector industries as well as industries with export potential had to adopt advanced technologies. The list of industries open to large industrial houses and, FERA companies was, therefore, being revised as per list appended in the press-note. Item No. 20 in the said list stated "High Technology Reproduction and Multiplication equipment".
15. It was submitted that the assessee is a joint venture company in the then MRTP group, i.e., Modi group and a foreign company, i.e., Rank Xerox. The joint venture company applied for an industrial licence for manufacturing xerographic equipment and systems under item 20 of the list in the appendix to press-note dt. 21st April, 1982. The application was moved on 27th July, 1982. Assessee received letter of intent on 15th July, 1983. It was argued that industrial licencing policy has to be taken into account while interpreting the assessee's item of manufacture. This is an item of higher priority. It is falling in CCRE group in IDR Act.
16. It was submitted that on 20th Oct., 1983, assessee sought confirmation from the CBDT as to the effect that whether the proposed item of manufacture was covered in Sch. XI of the Act The CBDT clarified to the assessee's promoter company vide letter reproduced in Para 5.
16.1 On this factual backdrop, it was argued that a contemporaneous exposition by administrative authorities is a very useful and relevant guide to make interpretation of expression used in a statute.
(i) Deshbandhu Gupta & Ors. vs. Delhi Stock Exchange (1979) 4 SCC 565;State of Tamil Nadu vs. Mahi Traders 17. On the aforesaid premises it was argued that CBDT's response to the assessee's request should receive due weight. Reference was almost to the decision of the apex Court rendered in the case of Union of India vs. Godfrey Philips India Ltd. & Ors. (1985) 22 ELT 306 (SC). In this case Central Board of Excise and Customs concluded that the cost of corrugated fibreboard containers would not be included in the value of cigarettes for the purpose of assessment of excise duty. The company acted upon this representation. Later when the excise duty was sought to be levied on a different basis, it was held that when based on representation of Cigarette Manufacturers Association, the CBEC gave a clarification, it would be most inequitable to take a contrary view and that the Central Government and CBEC were bound by the rule of promissory estoppel.Dunlop India Ltd. vs. Union of India 17.2. In the DCM case, it was held that in order to apply the principle of promissory estoppel all that is required to be shown is that the party relied and acted on the representation made to him and the assurance given to him. It was observed that the doctrine of promissory estoppel is well established in India. The basis of this doctrine was the interposition of equity which is always true to its form stepped in to mitigate the rigour of strict law.
18. Reference was also made to the decision of the apex Court in the case of CIT vs. J. H. Gotla (1985) 156 ITR 323 (SC) wherein it was held that "though equity and taxation are often strangers, attempt should be made that these do not remain always so and a construction that results in equity rather than an injustice should be preferred to the literal construction." 19. Learned counsel placed reliance on the principles of promissory estoppel and contemporaneous exposition. This was without prejudice to the basic submission that items 22 and 10 of Sch. XI do not cover the assessee's item of manufacture, howsoever, the two items are read and interpreted. The applicability of the rules of "ejusdem generis" and "nosciter a soccis" was also discussed. Reliance was placed on the decision of apex Court rendered in the case of Oswal Agro Mills Ltd. vs. Collector of Central Excise (1993) 66 ELT 37 (SC). It was held in this case that the doctrine of reading down has been applied only to sustain the constitutionality of the statute. There is no quarrel with the exposition that in ascertaining the meaning of a word or clause or sentence in the statute in its interpretation, everything which is logically relevant should be admissible. It is no doubt true that the doctrine of nosciter a soccis meaning thereby, that it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them i.e., when two or more words which are susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general is restricted to a sense analogous to a less general. The philosophy behind it is that the meaning of the doubtful words may be ascertained by reference to the meaning of words associated with it. This doctrine is broader than the doctrine of ejusdem generis. This doctrine was accepted by this Court in catena of cases, but its application is to be made to the context and the setting in which the words came to be used or associated in the statute or the statutory rule.
20. Our attention was also invited to the Hon'ble Finance Minister's speech, which he made while piloting the Finance (No. 2) Bill, 1977.
Items of manufacture listed in Sch. XI were described as items of low priority. The consideration whether an article or thing was of low priority was said to be again reflected in Hon'ble Finance Minister's speech while moving the Finance Bill, 1981. Certain items included in Sch. XI were removed from the list on the ground that many of those items could no longer be considered as low priority.
21. It was argued that assessee's item of manufacture is an item of high priority. It represented an item of manufacture in the CORE sector. It is an import substitute. It includes export obligation. It is open to MRTP and FERA companies. Such companies could not manufacture an item of low priority.
22. It was submitted that office machines and apparatus, such as, typewriters, calculating machines, etc., are relatively simple items of manufacture whereas xerographic equipment are highly complex and sophisticated electronic products. They perform multifarious functions like high-speed duplication, reduction or enlargement of any documents and drawings, transmission of documents and drawings through electronic tele-copiers, etc., The machines are automatic document handling, sorting and collating devices. The machines have a micro- processor based on electronic system for control and diagnostic support. The micro computer is used to control various functions and the machine is equipped with automatic fault-finding and job recovery system.
23. The predominant use of the xerographic system is by those who have installed the machines as part of their income earning activity through job work using the machine for servicing the various customers' requirements. The machines do not are just copying document. A demonstration of the said machine was made before us. It was shown that machines are capable on their own altering the size, colour effect, placements, etc. On that basis it was argued that such a machine cannot be described as a machine or apparatus for doing office work as stipulated in Expln. to item 22 of the schedule. Reference was also made to the decision of the Special Bench rendered in the case of Daks Copy Services (P) Ltd. vs. ITO (1989) 34 TTJ (Bom) SB) 604 : (1989) 30 ITD 223 (Bom) (SB). In this case assessee derived income from photocopying of documents. The assessee was registered as a small scale industrial unit. The activity mentioned on the certificate as "xerox printing and rotary copying". This was defined as service industry. The assessee installed certain machinery in respect of the business and claimed investment allowance. It was not allowed by the Revenue on the ground that assessee was rendering services to its clients in taking out the necessary copies required by them. It could not be regarded as activity of manufacturing and selling those photocopies or xerox copies of documents to its clients and that the activity did not involve any industrial activity. On this factual matrix, the Special Bench of the Tribunal held that investment allowance on xerox and photocopying machine is allowable to the assessee. It was found that the machine in question did not function as an aid for the proper functioning of the office of the assessee. In fact they were commercially exploited by the assessee for earning the income.
24. Our attention was invited on the provisions of s. 80CC of the Act.
Deduction under s. 80CC at the relevant point of time was available to an investor who invested in the shares of a company carrying on business of manufacturing or production of an article or thing not being an article or thing specified in the list in the XI Schedule. It was submitted that Controller of Capital Issues was termed as the prescribed authority to certify whether the capital issued by the company could be construed to be eligible issue of capital under s.
80CC. It was sine qua non to enquire whether the company was engaged in manufacturing of article or thing specified in the XIth Schedule 25. Learned counsel produced before us certificate dt. 9th May, 1984, from the prescribed authority wherein capital issue by the assessee was held to be eligible issue of capital under s. 80CC of the Act. On that basis it was argued that the matter was examined for s. 80CC purposes and the clarification of CBDT is also available on the point and 32A deduction was also allowed which also requires the satisfaction of similar conditions. Therefore, no contrary view can be taken in the matter. On this factual backdrop, assessee took the plea of res judicata. Reliance was placed on the decision of the apex Court rendered in the case of Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC).
26. Next it was argued that the matter regarding claim under s. 80-I having been considered in the appeal against order under s. 143(3) by the CIT (A), jurisdiction under s. 263 was barred notwithstanding cl.
(c) of Expln. to sub-s. (1) of s. 263 of the Act, the assessee claimed that industrial undertakings of manufacturing of : (a) xerographic equipment; and (b) toner, developer and photo-receptors qualify for the deduction under s. 80-I of the Act. The AO held that deduction under s.
80-I can be claimed only on the total profits of the company and not with reference to the unitwise profits. Before the CIT (A) assessee contended that deduction under s. 80-I of the Act should be admissible : (a) with reference to the unitwise profits; and (b) without reducing the brought forward losses/allowances. The CIT (A) held that the deduction under s. 80-I of the Act was admissible on the profits derived from two eligible industrial undertakings that manufacturing of xerographic equipment and manufacturing of toner, developer, photo-receptor and not the third activity, i.e., service and trading activity. The CIT (A) directed the AO to ascertain the profits derived from the industrial undertakings for manufacture of : (a) xerographic equipment; (b) toner, developer and photo-receptor and allow deduction under s. 80-I of the Act with reference to such profits. It was submitted that eligibility of the assessee-company to claim deduction was established in the asst. yr. 1986-87. The order of the AO merged with the order of the CIT (A) qua the matter relating to deduction under s. 80-I of the Act in all its aspects. In these circumstances, CIT had no jurisdiction under s. 263 of the Act to revise the order.
(iii) ITO vs. Ahmedabad Engg. & Services Co-op. Society (1992) 44 TTJ (Ahd) 383; (iv) Dwarkadas & Co. (P) Ltd. vs. ITO (1982) 13 TTJ (Bom) 107 (SB) : (1982) 1 ITD 303 (Bom) (SB); and (v) CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC).
27. It was argued that where an authority has power or discretion to do something for which appropriate circumstances exist, whether or not that authority has, in fact, exercised that power is not relevant. The mere fact that CIT (A) did not consider the eligibility aspect is not material. The matter connected with the deduction under s. 80-I came up before the CIT (A). It was considered. It can be presumed that all the aspects connected with the issue were considered in toto. Therefore, the theory of merger will apply in the facts of the present case.Jute Corpn. of India Ltd. vs. CIT (iii) CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC); and (iv) CIT vs. First Leasing Company of India Ltd. (1995) 216 ITR 455 (Mad).
28. Next it was argued that action under s. 263 based on change of opinion is not permitted. It was submitted that AO specifically considered the issue. Assessee submitted explanation to the AO vide letter dt. 4th Jan., 1990. In this letter, it was stated that the product of the assessee is not falling within the ambit of Sch. XI of the Act. It is not open for the CIT to substitute its own opinion in place of that of the AO where the view of the AO is also a possible view.Jhulelal Land Dev. Corpn. vs. Dy. CIT (iv) Super Cassettes Industries (P) Ltd. vs. CIT (1992) 41 ITD 530 (Del).
29. Next it was argued that the deduction under s. 80-I cannot be withdrawn in the 5th year of claim. The assessee commenced its commercial production in the asst. yr. 1987-88 (according to the AO asst. yr. 1986-87). The manufacturing of toner, developer and photo- receptor commenced commercial production in asst. yr. 1988-89. The AO held that 1986-87 assessment year was the first year in which claim for deduction under s. 80-I was to be allowed. No such deduction was actually allowed in the asst. yr. 1986-87 to 1990-91 due to there being no positive income. It was submitted by the learned counsel that the claim for deduction under s. 80-I cannot be withheld in a subsequent year where relief has been held admissible in the earlier years.
Reference was made to the decision of CIT vs. Paul Bros. (1995) 79 Taxman 378 (Bom).
30. Finally the learned counsel made reference to the decision of the apex Court rendered in the case of Bajaj Tempo Ltd. vs. CIT (1992) 196 ITR 188 (SC) wherein it was held that a provision of a taxing statute granting incentive for promoting growth and development should be construed liberally; and since the provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provisions and not to frustrate it.
31. P. K. Sahu, learned Departmental Representative, appeared before us. Relevant documents and papers were filed. It was contended that the letter of CBDT, dt. 25th Jan., 1984, cannot be construed to be instructions to subordinate authorities within the meaning of s. 119 of the Act. This letter speaks about high technology reproduction and multiplication equipment. There is no mention in regard to the xerox machine.
32. It was further argued that law has to be interpreted independently.
The opinion of the CBDT is not binding on the Tribunal. Reference was made to the decision of the apex Court rendered in the case of Kerala Financial Corpn. vs. CIT (1994) 210 ITR 129 (SC). In this case, it was held that a circular of the CBDT under s. 119 of the Act cannot override or detract from the Act, inasmuch as what s. 119 has empowered is to issue orders, instructions or directions for the "proper administration of the Act" or for such other purposes specified in sub-s. (2) of the section. Such an order, instruction or direction cannot override the provision of the Act; that would be destruction of all the principles of law as that would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament.
33. Reference was also made to the case of Bengal Iron Corpn. vs. CTO 90 STC 47 (SC), wherein it was held that a circular issued by the Board cannot bind judicial or quasi-judicial authorities. It was submitted that a quasi-judicial authority is required to decide the question which may arise before it, in accordance with law, after hearing the parties concerned. It is expected of the quasi-judicial authorities to discharge their functions and duties in their capacity as such in a quasi-judicial manner in noway inhibited by any administrative orders and circulars.
34. It was submitted that there is no estoppel against the statute. The mere fact that the Deputy Controller of Capital Issues considered the issue of equity shares by the company as eligible issue of capital, does not operate estoppel. In the said order there is absolutely no discussion as to the fact that whether the product of the assessee-company can be construed to be office machine. It is open for the Tribunal to consider and decide the question afresh independently.
35. Sahu stated that decisions arrived in one assessment year are binding neither on the assessee nor on the Revenue in respect of subsequent assessment years. The principle of estoppel has no applicability to successive assessments. The Revenue authorities are not bound by any contention or admission or decision taken up in one assessment when the same issue comes up for decision in a different assessment. Reference was made to the decision of Delhi High Court rendered in the case of CWT vs. Meattles (P) Ltd. (1985) 156 ITR 569 (Del), wherein it was held that there is no estoppel against a statute.
Where the Revenue authorities take a particular view of the statutory provisions in the income-tax assessment and later on realise that it was a mistaken view, they cannot be estopped from taking a correct view of the statutory provisions later on.
36. Coming now to the dictum of res judicata. Sahu submitted that the rule of res judicata or estoppel, which applies to decisions of the civil Court has no application to the decisions of the IT authorities, so as to debar determination of a question decided in the previous assessment years from being reopened in proceedings relating to the subsequent years. Reference was made to the decision of Ambika Prasad Sonar vs. CIT (1987) 168 ITR 444 (All).
37. Learned Departmental Representative also relied on the decision of the apex Court rendered in the case of Radha Soami Satsang vs. CIT (supra) wherein it was held that strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
38. O. P. Vaish, in this context submitted that in this case Court emphasised that this decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application.
39. Learned Departmental Representative also relied on the decision of Aditya Textile Industries (P) Ltd. vs. CIT (1994) 209 ITR 779 (Bom), wherein it was held that the principles of res judicata are not applicable to the assessment proceedings for subsequent years.
(ii) Raja Bahadur Visheshwar Singh & Ors. vs. CIT (1961) 41 ITR 685 (SC); and 40. Learned Departmental Representative also placed reliance on the decision of the Tribunal rendered in the case of R. K. K. R.International (P) Ltd. vs. Asstt. CIT ITA No. 8378 (Del) of 1992 (Order dt. 29th Dec., 1997). He also relied on the decision of the apex Court rendered in the case of M. M. Ipoh & Ors. vs. CIT (1968) 67 ITR 106 (SC). On the backdrop of these facts, it was argued that the AO never applied his mind to the issue that the product of the assessee-company falls within the ambit of item 22 of Sch. XI of the IT Act, 1961.
41. Turning to the next limb of argument of Vaish, learned Departmental Representative vehemently argued that the product of the assessee-company comes within the ken of item 22 of Sch. XI. It is office equipment. Reference was made to the Budget Speech of the Finance Minister (1987). He came heavily on the argument that MRTP and FERA companies are not allowed in low priority items. Reference was made to McDowell, Coca Cola and Pepsi. It was stated that such companies are allowed to produce the items like soap and potato chips.
These are not the high priority items. It was stated that industrial policy will not go in tandem with fiscal policy. It was contended that photocopy cannot be equated with printing machinery. It can be classified as office equipment. It was stated that photocopying machines are normally office machines. These are mainly used for the office purposes.
42. Learned counsel took us through the functional test of the machine.
Reference was made to the decision of the apex Court in the case of Major V. P. Singh & Ors. vs. State of UP & Ors. (1993) 199 ITR 188 (SC). It was stated that if no definition is given then the meaning of the term as understood in the common parlance is to be seen. It was stated that essential characteristics of the project has to be seen.
Reference was made to the decision of the Tribunal rendered in the case of Monginis Bakery vs. Dy. CIT (1995) 55 ITD 271 (Bom). Learned Departmental Representative placed before us the Shorter Oxford English Dictionary to explain the meaning of xerographic. This is reproduced here as under : "Xerography (zi rq grafi) 1948. (f. Xero+graphy, after photography).
A process for copying documentary material that does not employ liquids or chemical development of the image, but uses instead an electrically changed surface with the property of retaining a (dark) powder on those parts not exposed to light from the document, so that a permanent copy may be made by placing paper on the surface and fusing the powder to it by heating. Hence, xerographic." 43. Learned Departmental Representative also relied on the decision of Nut Steel Equipment vs. Collector of Central Excise 1 SCC 605. In this case, it was held that it is not necessary that an electrical appliance, in order to satisfy the description of a domestic electrical appliance must be actually used in the home or the house. What is necessary is that it must be of a kind which is generally used for household purposes and if that test is applied, there is no doubt that electrical appliances are domestic appliances and the Tribunal was, therefore, right in holding that they fall within the entry 52 of Sch.
B.44. It was contended that general words which follow particular and specific words of the same nature as itself takes its meaning from them and is presumed to be restricted to the same genus as those words. In other words, the general expression is to be read as comprehending only things of the same kind as that designated by the preceding particular expressions, unless there is something to show that a wider sense was intended. According to the learned Departmental Representative the words "such as" exemplify the nature of office machines and apparatus contained in item 22 of Sch. XI. The job of typewriters and teleprinters is to transcribe the matter. The xeroxing is an advance method of copying the things. The transcribing could be copied to a limited extent on the typewriter. On xerox machine, it can be copied to any required number. It was, therefore, argued that the xerox machine falls within the same genus. Applying the rules of ejusdem generis and nosciter a soccis the learned Departmental Representative submitted that xerox machine comes within the ambit of Sch. XI.45. The learned Departmental Representative invited our attention on the decision of the apex Court rendered in the case of Novopan India Ltd. vs. Collector of Central Excise & Customs, JT 1994 (6) SC 80.
Relying on this decision, it was contended that in case of ambiguity in an exemption provision, the provision is to be construed strictly and in favour of the Revenue. It was stated that Central Excise Tariff Act (CETA) is based on HSN. This was stated to be an international nomenclature standard adopted by almost all the countries to ensure uniformity in classification in international trade. Though the CETA follows HSN pattern, it is not a copy of the same. Often, there are wide variations. CETA also varies significantly from Customs Tariff, though both are based on HSN. It was stated that words used in statute should be interpreted literally and not in the sense used in other statute enacted for different purposes. Reference was made to the decision of apex Court rendered in the case of MSCO (P) Ltd. vs. Union of India 1 SCC 51. It was stated that to interpret a word in accordance with its definition in another statute or instrument is hazardous. The instruments referred to by the learned counsel were not dealing with any common subject in order to explain the meaning of xerography.
Reference was made to the Shorter Oxford English Dictionary on Historical Numbers Vol. 2, p. 2672 wherein it is defined as a process for copying documentary material that does not employ liquid or chemical development of the image, but uses instead an electrically charged surface with the property of retaining a (dark) powder on its face not exposed to light from the documents, so that a permanent copy may be made by placing paper on the surface and fixing the powder on it by heating.
46. Sahu also made a reference to the decision of Supreme Court rendered in the case of Atul Glass Industries (P) Ltd. vs. CCE 3 SCC 480 wherein the Court examined the question that how the product is identified with the class of people dealing with or using the product.
It was held by the apex Court that when a consumer buys an article, he buys it because it performs its specific function for him.
That is the mental association of the mind of the consumer between an article and the need it applies in his life. It is the fundamental character of the article which identifies it is his mind. In the case of a glass mirror, the consumer recalls primarily a reflective function of the article more than anything else. It is the mirror, an article which reflects image. It is referred to as a glass mirror only because the word 'glass' is descriptive of the mirror and that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in the mirror. Following this analogy the learned Departmental Representative went on to say that xerox machine is nothing but a copier which is used for office purposes. It is, therefore, an office machine and apparatus.
47. The learned Departmental Representative also took us through various advertisements appeared in the newspaper. The Modi Xerox desk top copier was projected as a new attraction in office. But in other advertisements it was stated that "every modern office should have these three machines". Down to the picture of machine it was stated the three in one HP office jet pro 1150 C. It scans. It prints. It photocopies. It is true to the original vivid column and at Rs. 64,900 it saves your money plus valuable office space.
48. The learned Departmental Representative also placed before us the analysis of company results given in the magazine Capital Market 25th Jan., 1998. The Modi Xerox is listed under the caption 'office equipment-photocopier'. Our attention was also invited on some newspapers wherein Modi Xerox was listed under the head 'office machinery'.
The learned Departmental Representative further submitted that for adjudging the nature of machinery one should strictly see its nature.
Admittedly, photocopying machines are normally office machines. Xerox machine is also a photocopier. Its cost or the time factor for training cannot be the criteria for determining its nature. It should be seen that how public understand this machine in common parlance and how the machine is known in the trade circle.
49. Coming to the issue of merger it was contended that the issue apropos the eligibility was not before the CIT (A). It is irrelevant that CIT (A) had any power to decide that issue. Normally in appeal matters appellate authorities focus their attention on the issues involved in the appeal. The issue apropos the eligibility was not contested. It was, therefore, not possible for the AO or for the CIT (A) to pass any remark on the same. From this it cannot be inferred that CIT (A) adjudicated the complete issue. The learned Departmental Representative took us through various cases referred to by the learned counsel. It was submitted that these cases were decided on different facts and these cannot be applied in the facts and circumstances of the present case. On the point that de hors eligibility there is no question of computation, learned Departmental Representative submitted that these two things are different. These can be examined independently. When the aspect of eligibility was not in dispute there was no reason to tinker with the issue. One can focus its attention only on the aspects relevant to the issue.
50. Coming to the aspect connected with "Change of Opinion" it was stated that the opinion of CIT was well founded. He did not change his opinion. The issue was decided on its merits. It was amply demonstrated in the order under s. 263 that the order of the AO was erroneous and prejudicial to the interest of the Revenue.
51. We have heard the rival submissions in the light of material placed before us and precedents relied upon. We have gone through the various documents and papers filed before us. The matter was argued at length.
The various arguments placed before us by Vaish resemble so many raddi of a circle starting from different points on its circumference, such as, xerox machine is not an office equipment, principles of res judicata and promissory estoppel applies in the facts of the present case, theory of merger, validity of the CIT's order in view of the change of opinion. All these points are oriented towards the question that the item manufactured by the assessee falls beyond the ken of Eleventh Schedule of the Act, and conditions precedent for assuming jurisdiction under s. 263 did not exist in the facts and circumstances of the present case.
52. Reference was made to the letter of CBDT dt. 25th Jan., 1984, reproduced hereinbefore at para 5 of the order. On the basis of this letter learned counsel argued that the principles of promissory estoppel can be applied in the facts of the present case. It was argued that the Department cannot be allowed to resile from its promise, because this would work injustice to the assessee. Learned counsel submitted that CBDT's response to the assessee's request should receive due weight.
53. For invoking the principle of promissory estoppel, a firm or specific assurance from the authority concerned is needed. In the letter dt. 25th Jan., 1984 it is only laid down that high technology reproduction and multiplication equipment does not come within the ambit of Sch. XI to the IT Act, 1961. This cannot be construed to be an instruction issued pursuant to the provisions of s. 119 of the Act.
54. The secretary of the CBDT has not given any assurance to the assessee. The doctrine of promissory estoppeal has no application against the statute. The matter, therefore, needs to be viewed in the light of the statutory provisions. Therefore, in our opinion, the doctrine of promissory estoppel does not apply in the facts of the present case.
55. Learned counsel produced before us certificate dt. 9th May, 1984, from the prescribed authority wherein capital issue by the assessee was held to be eligible issue of capital under s. 80CC of the Act. On that basis it was argue that matter was adjudicated for the purposes of s.
80CC. There also the condition of Sch. XI applies equally. It was also argued that deduction contemplated under s. 32A was also allowed. This also requires the satisfaction of similar conditions. No contrary view can be taken in the matter for the purpose of the deduction under s.
80-I of the Act. On this factual backdrop, the assessee took the plea that the issue under consideration got adjudicated and cannot be reagitated in view of the dictum of res judicata.
56. As a general rule the principle of res judicata is not applicable to the decisions of IT authorities.
57. Sec. 11 of the CPC provides that no Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised and has been heard and finally decided by such Court. The basic principle of the doctrine of res judicata is that the cause of action for the second suit or action being merged in the judgment of the first, it does not any more survive.
58. It is now well settled that the principle of res judicata or estoppel by record, which applies to decisions of civil Courts, has no application to decisions of IT authorities so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to the subsequent assessment year.
This view was taken by the apex Court in the case of New Jahangir Vakil Mills Co. Ltd. vs. CIT (supra) and ITO vs. Murli Dhar Bhagwan Dass (1964) 52 ITR 335 (SC). The reasons are, firstly, that the IT authorities including the Tribunal are not Courts; and secondly, that the purpose and the subject-matter of the proceedings in a subsequent year are not the same as those in a previous year.
59. There are catena of cases in the same stream wherein it is laid down that as a general rule the principle of res judicata is not applicable to the decisions of IT authorities, an assessment for a particular year is final and conclusive between the parties only in relation to that year. Decisions given in an assessment for an earlier year are not binding either on the assessee or on the Department in a subsequent year.
60. The rule of res judicata is subject to some limitations. There should be finality and certainty in all litigations including litigation arising out of IT Act. An earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse and it had been arrived at after due enquiry, and no fresh facts are placed before the IT authority in the later decision and the IT authority in the earlier decision has taken into consideration all material evidence. This view was taken in the case of CIT vs. Dalmia Dadri Cement Ltd. (1990) 77 ITR 410 (Pun). The other limitation is that the effect of revising the earlier decision should not lead to injustice and the Court may prevent an assessing authority from doing something which could be unjust and inequitable - CIT vs. Belpahar Refractories Ltd. (1981) 128 ITR 610 (Ori).
61. In the case of M. M. Ipoh vs. CIT (supra) it was held that the assessment and the facts found are conclusive only in the year of assessment; the findings on questions of fact may be good and cogent evidence in subsequent years, when the same question falls to be determined in the other year, but they are not binding and conclusive.
62. We have noted the fact that the Controller of Capital Issue has considered this aspect for the purpose of s. 80CC. We have also noted that the Department adjudicated this issue for s. 32A purpose. But, in our opinion, this does not operate res judicata. The issue apropos the applicability of s. 80-I was not considered. It is well within the power of the Tribunal to consider all these aspects afresh in consonance with the provisions of the statute.
63. Next it was argued that xerox machine is not an office equipment.
The functional use of the machine, manufactured by the assessee- company was highlighted. The working of the machine was explained. Our attention was invited to the industrial licencing policy as it applied at the time when the assessee was granted the licence to manufacture xerox system and equipment. How and under what conditions the licence was granted was also explained before us. Learned counsel also made a reference to the Hon'ble Finance Minister's speech which he made while piloting the Finance (No. 2) Bill, 1977. Items of manufacture listed in Sch. XI were described as items of low priority. The consideration whether an article or thing was of low priority was said to be again reflected in the Hon'ble Finance Minister's speech while moving the Finance Bill, 1981. Our attention was also invited on the Harmonised system of Nomenclature (HSN) issued by World Customs Organisation, Brussels. Various documents and papers were filed by both the parties to demonstrate that whether the item manufactured by the assessee could be construed to be the office machine. Learned Departmental Representative produced before us some magazines and papers containing the stock exchange quotations wherein Modi Xerox was listed under office equipment. He also took us through some advertisements wherein xerox machine was projected as an office equipment. Vaish submitted that the machine is not used only for the office purpose, but it can also be used by jobbers and self-employed persons. But the percentage of user by jobbers and self-employed was not given. Therefore, it cannot be said that it was predominently used by the jobbers and self- employed.
64. The speech made by the mover of the Bill in explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. The rule of contemporanea expositio, permits the interpretation of a statute by reference to the exposition it has received from contemporary authorities. It is said that the best exposition of a statute or any other document is that which is has received from contemporary authority. optima est legum interpres conseutudo contemporanea expositio est fortissima in lege where this has been given by enactment or judicial decision, it has, of course, to be accepted as conclusive. The language of a statute must be understood in the sense in which it was passed.
65. Now we proceed to examine the provision of the statute with reference to the rule of ejusdem generis and Nosciter a soccis. When followed by general words, the general words are construed as limited to things of the same kind as those specified. This rule which is known as the rule of ejusdem generis reflects an attempt "to reconcile incompatibility between the specific and general words in view of the other rules of interpretation that all words in a statute are given effect if possible, that a statute is to be construed as a whole and that no words in a statute are presumed to be superfluous.
66. The rule of construction nosciter a soccis prescribes that the meaning of a word is to be judged by the company it keeps. It is a rule wider than the rule of ejusdem generis. When two or more words are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense.
67. Item 22, of Sch. XI is reproduced in para 3. It begins with the word office machines and apparatus such as ......... This only exemplify the office machines. The term office machines is not exhaustively defined in the statute. Machines like typewriter, calculating machines, cheque writing machines, intercom machines and teleprinters are some of the examples of the office machines.
Explanation appended to item 22 makes the meaning of the term office machines more explicit. The term includes all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels, and restaurants for doing office work. A machine which can be used for doing the office work can be construed to be office machine. It could be a typewriter, copier or any other such machine. Xerox machine is mainly used for copying purposes. More sophisticated machines contain some other functions but basically the xerox machine is used for the copying purposes. In the common parlance it is cognised as office equipment.
Even the advertisement concerning the product stresses its utility vis-a-vis the office work.
68. The intention of legislature assimilates two aspects. In one aspect it carries the concept. In other aspect it carries the 'reason and spirit' pervading through the statute. The intention of the legislature must be found in the words used by the legislature itself. The CETA generally follow HSN pattern, it is not the same. Often, there are wide variations between HSN and CETA. Functional test can be applied for determining the character of a product. Nomenclature is not decisive in ascertaining the nature of the product. In the case of Atul Glass Industries vs. CCE 1986 (25) ELT 473 (SC), it was held by the Supreme Court that glass mirrors cannot be classified as "glass and glassware" even though glass mirrors have been classified as "glass and glassware" in ISI (Indian Standard Institution) classification. In another case it was held that the wind-screen for motor vehicle will be "motor vehicle part and not glass and "glass- ware" as it is known in the market as "motor vehicle part". The word or expression must be construed in the sense in which they are understood in the trade, by the dealer and the consumer.
69. The xerox machines are used mainly for the copping purposes. In one of the advertisements of Modi Xerox the catchlines were : "the new attraction in your office". Thereafter the functions of desk top copier were explained which includes zoom enlargement and reduction facilities, etc. In one other advertisement of Godrej Pacific while making advertisement for HP office Zet No. PRO 1150 C it was stated "every modern office should have these three machines." In the magazine "Capital Market" dt. 25th Jan., 1998, analysis of company results were given. Modi Xerox was listed under item 197 "office equipment photo-copiers. Similarly in the Business Standard dt.
9th Feb., 1998, Modi Xerox is listed under the head "Office equipment".
The apex Court in the case of Royal Hatcheries (P) Ltd. vs. State of A.P. JT 1993 (6) SC 248 has held that in a taxing statute language which is capable of being construed in a popular sense is not to be construed according to the strict or technical meaning of the language contained in the statute, but is to be construed in its popular sense. It was further held that the words "such as" are meant to be illustrative and not exhaustive. Some articles were also brought to our notice where the copier was exemplified as an office automation product.
70. We have considered the functions of xerox machine. We have also examined the various documents and papers, describing the character of xerox machine and its user. We have also perused the precedents relied upon by both the parties. The word of a statute should be given a sensible meaning so as to make them effective. Everything which is relevant should be considered. But statute should be construed ex visceribus actus i.e. construction within the four corners of the Act.
Nebulous concept of legislative intent cannot be used to curtail the explicit provision in a statute. There exist no ambiguity in law. If xerox machine can be construed to be office machine, the product will come within the ambit of Sch. XI. Office machines are exemplified in item 22 of Sch. XI. Xerox machine falls within the same class. This is abundantly clear from the aforesaid discussion. We, therefore, hold that xerox machine comes within the ken of Item 22 of Sch. XI.71. We now proceed to examine whether the conditions precedent for assuming jurisdiction under s. 263 did exist in the facts and circumstances of the case. The panoply of s. 263 of the Act, is erected on the palladium of corrective justice. Its object is not to set aside merely unfavourable orders and bring to tax some more money to the exchequer. The section is not meant to keep vigil on escapement of Revenue. This aspect is taken care of by the other provisions of the Act. The prejudice i.e. contemplated under s. 263 is prejudice to the income-tax administration as a whole. Sec. 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate order, in exercise of the supervisory power. It is to be invoked and employed only for the purpose of setting right distortions and prejudices to the Revenue. It is beyond dispute that under s. 263, CIT does have the power to set aside the assessment order and send the matter for a de novo investigation if he is satisfied that further enquiries needed and the order of AO is prejudicial to the interests of the Revenue. For assuming jurisdiction under s. 263, it is sine qua non, that the impugned order must be erroneous and prejudicial to the interest of Revenue. Both the conditions must be satisfied.
72. There was, upto 31st March, 1988, conflicting judicial opinion whether, after an assessment has been subjected to the first appellate order the point which was neither raised in appeal nor dealt with by the first appellate authority to do or don't, merge in the appellate order. With effect from 1st June, 1988, as a result of cl. (c) of the newly substituted Expln. to s. 263(1) by the Finance Act, 1988, and subsequently, amended by the Finance Act, 1989, where any order passed by the AO, which may be amenable to the revisional jurisdiction under s. 263(1) had been the subject-matter of any appeal filed on or before or after 1st June, 1988, the powers of CIT under s. 263(1) are to extend and to deem always to have extended to such matters as had not been considered and decided in such appeal.
73. It was submitted before us that the claim under s. 80-I of the Act was considered by the CIT (A) against the order passed under s. 143(3).
The AO held that deduction under s. 80-I can be claimed only on the total profits of the company and not with reference to the unitwise profits. Before the CIT (A) it was contended that deduction under s.
80-I should be allowed with reference to unitwise profit and without reducing the broughtforward losses an allowances. CIT (A) held that deduction under s. 80-I was admissible on the profits derived from true eligible industrial undertakings engaged in the manufacturing of xerographic equipment and toner, developer, photo-receptor. Directions were given to the AO to ascertain the profit derived from the industrial undertakings and to allow deduction under s. 80-I of the Act with reference to such profits. It was submitted that eligibility of the assessee-company to claim deduction was established in the year under consideration. The order of the AO merged with the order of the CIT (A) qua the matter relating to deduction under s. 80-I of the Act in all fours. In these circumstances, CIT had no jurisdiction under s.
263 of the Act to revise the order.
74. The Special Bench of the Tribunal in the case of Dwarka Dass & Co.
(P) Ltd. vs. ITO (supra) held that for the purpose of jurisdiction under s. 263 the ITO's order merges with that of the AAC not only to the extent to which the AAC has, as a matter of fact dealt with, but also to the extent to which he had power to look into with a view to enhancing within the limit prescribed by the Supreme Court in its decision in the case of CIT vs. Rai Bahadur Hardutt Roy Moti Lal Chamaria (supra).
75. It was further argued that where an authority had power or discretion to do something for which appropriate circumstances did exist, whether or not that authority has, in fact, exercised that power, such an authority should be deemed to have exercised that power.
Consequently, the issues emanating out of the assessment order which were decided by the ITO in assessee's favour over which the CIT (A) had power to examine and pass appropriate orders, but did not actually do so, the CIT (A) should be deemed to have been examined those issues and agreed with the AO and, thus, that portion merged with the order of the CIT (A). Therefore, apropos the issues disputed in appeal, the CIT (A) should be deemed to have considered and decided all aspects of the matter.
76. The matter which CIT brought was concerning the eligibility. The aspect apropos the eligibility was not disputed before the CIT (A). CIT (A) proceeded on the basis of the presumption that conditions concerning the eligibility aspect were duly satisfied with. Since this aspect was not before him, no opinion was expressed on the same.
Normally in appeal matters the authorities focus their attention on the issues involved in the appeal. The matter which are beyond controversy are not enquired into. It is not possible for one to see the Himalaya in a flash of lightening. One is expected to focus the attention only on those points which are relevant to the issue. In our opinion, it won't be proper to say that the issue apropos the eligibility can be said to be decided on the deemed basis. This won't be in terms of the fine norms of justice.
77. Next it was argued that action under s. 263 was bad in law as jurisdiction under s. 263 cannot be assumed on the basis of change of opinion. We have noted that the issue was considered by the AO.Assessee submitted explanation to the AO vide letter dt. 4th Jan., 1990. In this letter, it was categorically stated that the product of the assessee was not falling within the ambit of Sch. XI of the Act. It was vehemently argued before us that CIT cannot substitute its own opinion in place of that of the AO, where the view of the AO is also a possible view.
78. Taking into consideration the entire conspectus of the case, we find that the view taken by the AO was also a possible view. It may be a correct view, it may not be a correct view. What is to be seen is whether AO acted in accordance with law or not It cannot be said that the view taken by the AO was patently erroneous. Good many reasons can be given in support of the view taken by the AO. There can of course be cleavage of judicial opinion over a particular matter. We recollect the famous saying of Justice Bernard Botein : "The law will never be entirely clear to any judge, just as a beautiful woman is always a bit of mystery to her lover. Were it otherwise each would lose part of her charm. But the wise judge, like the wise lover, will be the master of his true love, although he may not understand her completely and though she is sometimes too difficult for him." 79. Hon'ble Madras High Court in the case of Venkata Krishna Rice Company vs. CIT (1987) 163 ITR 129 (Mad) has held that AO's order of assessment in accordance with law could not be said to be erroneous and CIT cannot assume jurisdiction under s. 263 on the basis of change of opinion only because he had some other opinion in the matter. Similar view was taken in the case of CIT vs. Gabrial India Ltd. (supra). In this case it was held that CIT cannot revise order under s. 263 merely because he disagree with the conclusion arrived at by the AO.80. For assuming jurisdiction under s. 263 it is a sine qua non that the twin conditions must be satisfied i.e., (i) order must be erroneous and (ii) prejudicial to the interest of the Revenue. CIT must have some cogent material before him to declare the order of AO erroneous. The order of the AO cannot be held to be erroneous merely on the whims and fancies of the CIT. In the instant case, on factual or legal error was pointed out by the CIT. The AO appreciated the complete facts. All the relevant enquiries were made. Clarification by the CBDT in the matter was available. Assessee got the approval under s. 80CC where the similar conditions need to be satisfied. Assessee also got the deduction under s. 32A. There also assessee need to satisfy the identical conditions. In the preceding years the claim of the assessee was allowed. Xerox machine was considered to be different from the office equipment. It is a matter of interpretation. There is no direct decision of the binding nature on the issue. We are, therefore, inclined to agree with the submissions of O. P. Vaish, that the power under s. 263 of the Act were assumed on the basis of change of opinion.
We, therefore, hold that conditions precedent for assuming jurisdiction under s. 263 of the Act did not exist in the facts and circumstances of the present case. Accordingly, we quash the order passed under s. 263 of the Act.