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Commissioner of Income-tax, Tamil Nadu Vs. Ennore Foundries Limited - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 189 of 1978 and 1266 of 1979
Judge
Reported in(1985)45CTR(Mad)321; [1985]151ITR464(Mad)
ActsIncome Tax Act 1961 - Sections 80-I, 80J(3), 84 and 256(1); Income Tax Act, 1922 - Sections 15C,
AppellantCommissioner of Income-tax, Tamil Nadu
RespondentEnnore Foundries Limited
Appellant AdvocateC.V. Rajan, Adv.
Respondent AdvocateS.V. Subramaniam, Adv.
Excerpt:
- - 3,26,610 during the year ending september 30, 1961, the tribunal has stated that even during the trial stage when certain trainees were trained in the factory certain goods have been manufactured and when those goods were found to be of good quality, messrs......year 1970-71. in this case, the tribunal has given a categorical finding that the assessee started commercial production only in november, 1961, and therefore, the assessee is entitled to claim s. 80j relief in a sum of rs. 5,61,349 in the assessment year 1967-68 as that being the fifth year from the year of commercial production. if really commercial production started in november, 1961, the assessee is entitled to claim s. 80j relief in the year 1970-71 is not and cannot be disputed. but according to the revenue, commercial production started even in july, 1960, and therefore, the assessee is not entitled to claim s. 80j relief in a sum of rs. 5,61,349. thus, the substantial point in controversy is as to when the assessee commenced commercial production in his undertaking......
Judgment:

Ramanujam, J.

1. These two tax cases relate to the same assessment year 1970-71. In T.C. No. 189 of 1978, the following two question have been referred by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961, to this court for its opinion :

'(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction of Rs. 5,61,349 under section 80J(3) of the Income-tax Act, 1961, for the assessment year 1970-71, the same representing the amount on which tax was not payable under section 84 for the assessment year 1967-68

(2) Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction of 8% of Rs. 69,37,362 being the profit and gains from the business computed for the assessment year 1970-71, before setting off the unabsorbed development rebate relating to the assessment year 1967-68 ?'

2. In T.C. No. 1266 of 1979, the following two question have been referred by the Tribunal on a direction given by this court under s. 256(2) of the I.T. Act :

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's finding that the production in the assesse's case was commenced in November, 1961, and not in July, 1960, is based on valid and relevant materials and is sustainable in law

'(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to carry forward the alleged deficiency under section 84 relating to the assessment year 1967-68 and set it off against the profit for the year 1970-71 especially when the Income-tax Officer has not determined the relief under section 84 since the assessee had not made any claim at all in the assessment year 1967-68 ?'

3. So far as question No. 2 referred in T.C. No. 189 of 1978 is concerned we find that it is covered by the decisions of this court in CIT v. English Electric Company Ltd. : [1981]131ITR277(Mad) and CIT v. Standard Motor Products of India Ltd. : [1981]131ITR300(Mad) , wherein this court has answered a similar question in favour of the Revenue. Since the said decisions cover the second question, we have to answer the second question in T.C. No. 189 of 1978 in the negative and in favour of the Revenue.

4. It is also seen that question No. 2 in T.C. No. 1266 of 1979 is also covered by the decision in CIT v. Bluemount Ceramics Ltd. : [1980]123ITR385(Mad) . Though the learned counsel for the Revenue seeks to avoid the application of the said decision to the facts of this case by saying that the Tribunal has not given specific finding that the assessee has not earned any profit in the earlier years, we are of the view that the Tribunal has in fact proceeded on the basis that the assessee was entitled to carry forward the deficiency under s. 84 against the profits of the year 1970-71. We have to, therefore, answer question No. 2 referred in T.C. No. 1266 of 1979 in the affirmative and against the Revenue.

5. As regards question No. 1 in T.C. No. 189 of 1978 and question No. 1 in T.C. No. 1266 of 1979, we find that both the questions cover the two aspects of the same question. The two questions relate to the question as to when the commercial production was started by the assessee and whether the assessee is entitled to carry forward s. 80J relief and get a set-off for the assessment year 1970-71. In this case, the Tribunal has given a categorical finding that the assessee started commercial production only in November, 1961, and therefore, the assessee is entitled to claim s. 80J relief in a sum of Rs. 5,61,349 in the assessment year 1967-68 as that being the fifth year from the year of commercial production. If really commercial production started in November, 1961, the assessee is entitled to claim s. 80J relief in the year 1970-71 is not and cannot be disputed. But according to the Revenue, commercial production started even in July, 1960, and therefore, the assessee is not entitled to claim s. 80J relief in a sum of Rs. 5,61,349. Thus, the substantial point in controversy is as to when the assessee commenced commercial production in his undertaking. According to the Revenue, commercial production started in July, 1960, while according to the assessee its commercial production started in November, 1961. As already stated, the Tribunal has given a finding after referring to the various facts and circumstances that the trial production alone started in July, 1960, and the commercial production started in July, 1961. This finding has been challenged on three grounds : (1) The assessee's auditors, M/s. Fraser and Ross, have informed by their letters dated June 20, 1963, and April 3, 1964, that the production has commenced from July, 1960, and there is no reason as to why these letters should be ignored. (2) The assessee itself has claimed depreciation for the assessment years 1961-62 and 1962-63 which means that the assessee should have started commercial production even in the year 1960. (3) The assessee has in fact sold goods worth about Rs. 3,26,610 during the year during the year ending September 30, 1961, and this would show that commercial production has in fact started in 1960. The Tribunal has considered all these three factors referred to above and has held that what the auditors refer in the letters dated June 20, 1963, and April 3, 1964, is only the trial production and the production referred to by them is not commercial production. So far as the claim for depreciation in the year 1961-62 is concerned, the Tribunal has held that since the assessee had used machinery for trial production, they are entitled to claim depreciation and the claim for depreciation for the year 1961-62 will not establish that the assessee started commercial production even in the year 1960. Referring to the sale of castings of the value of Rs. 3,26,610 during the year ending September 30, 1961, the Tribunal has stated that even during the trial stage when certain trainees were trained in the factory certain goods have been manufactured and when those goods were found to be of good quality, Messrs. Ashok Leyland offered to purchase the same and the assessee, therefore, sold them even before the commercial production started. Thus, all the three grounds urged by the learned counsel for the Revenue have been considered and dealt with by the Tribunal. It is not as if the Tribunal has omitted to consider any relevant material. After going through the judgment of the Tribunal, we are inclined to agree with the view taken by the Tribunal in this case. In the facts and circumstances of the case, the Tribunal appears to be right in holding that commercial production started only in November, 1961, and if this finding is accepted, it cannot be disputed that the assessee can claim carry forward s. 80J relief in the assessment year in question as that being the fifty year from the year of production. In this view, we are not in a position to disagree with the Tribunal on the facts and circumstances of this case on the first question in each of these references. Therefore, the first questions in T. Cs. Nos. 189 of 1978 and 1266 of 1979 are answered in the affirmative and against the Revenue. There will however, be no order as to costs.


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