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PETITIONER: COMMISSIONER OF INCOME TAX, GUJARAT

       Vs.

RESPONDENT: CELLULOSE PRODUCTS OF INDIA LTD.

DATE OF JUDGMENT04/09/1991

BENCH: OJHA, N.D. (J) BENCH: OJHA, N.D. (J) RANGNATHAN, S. RAMASWAMI, V. (J) II

CITATION:  1991 AIR 2285            1991 SCR  (3) 888  1991 SCC  (4) 467        JT 1991 (3)   599  1991 SCALE  (2)466

ACT:       Income  Tax Act 1961: Sections 84 and 261--New  Indus- trial Undertaking--Exemption--Commencement of period----When arises.

HEADNOTE:       The respondent is a Public Limited Company incorporat- ed on    April 14, 1989 for carrying on business of manufac- turing  chemical    products particularly of Carboxy  Methyl Cellulose (CMC) and Cellulose Pulps. The respondent was also granted an industrial licence by the Central Government  for the manufacture of Carboxy Methyl Cellulose. The  respondent had installed a cellulose plant in which cellulose pulp, the raw material for Carboxy Methyl Cellulose was  manufactured. The    plant had begun production from March 1961 while  the production of Carboxy Methyl Cellulose was started from June 15, 1961.      The  respondent  claimed  relief under  section  84  of Income  Tax Act as it stood prior to its being deleted  with effect  from April 1, 1968 by Finance Act (2) 1967, for  the assessment  year  1966-67, the previous year  of  accounting being the financial year 1965-66.      The  Income  Tax Officer took the view that  since  the respondent  had  started production of cellulose  pulp  from March,  18  1961,  it had begun to  manufacture  or  produce finished articles or goods in the year ending March 31, 1961 and consequently the assessment year 1961-62   was  the first year in which the assessee was entitled  to relief  under section 84 Sub-section (7) of the  Income  Tax Act under which the relief contemplated was to be  available only  for live assessment years. So the respondent  was  not entitled to relief in the assessment year 1966-67 which fell beyond the aforesaid period.      The  above view the Income Tax Officer was affirmed  in appeal  by  the Appellate Assistant Commissioner.  Even  the Income  Tax  Appellate  Tribunal held  that  the  respondent having  begun production or manufacture of finished  product which was capable of being sold in the market in the year of accounting relevant to the assessment year 1961-62 the  last year  in  which the respondent was entitled  to  get  relief

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under section 84 of the Act was the assessment year  1965-66 and the claim for 889 the relief in the assessment year 1966-67 was not  maintain- able.  The High Court on reference, held that the mere  fact that  the  respondent started production of  Cellulose  Pulp which was an intermediate  product on March 18, 1961 did not mean  that the company had begun to produce  or  manufacture "articles"  in the assessment year 1961-62 because the  word "articles"  used  in Sub-section (7) of section  84  in  the context,  could  be only the end product of  the  industrial undertaking  as a whole where there was no phased  programme of installation and construction. Allowing the appeal of the Revenue with costs, the Court,     HELD:  The High Court on the facts and circumstances  of the instant case committed an error in interfering with  the conclusion  of the Tribunal. It is settled law that  a  High Court  while  hearing  a reference under the  Act  does  not exercise  any appellate or revisional or supervisory  juris- diction over the Tribunal and it acts purely in an  advisory capacity.  Further  in the instant case the finding  of  the Tribunal  did  not suffer from any infirmities such  as  not being supported by any evidence or being perverse or patent- ly unreasonable. The production of Cellulose Pulp during the month  of  March, 1961 was a finished product  which  was  a marketable  commodity. It is true that Cellulose  Pulp  also constitutes  raw material for manufacture of Carboxy  Methyl Cellulose and the circumstances that the industrial  licence granted to the respondent was for the manufacture of Carboxy Methyl  Cellulose  which also included  the  manufacture  of Cellulose Pulp which was intermediate product to be used  in its  turn as a raw material for the manufacture  of  Carboxy Methyl  Cellulose. The relevent clause of the Memorandum  of Association  of the respondent company is obviously wide  in its  amplitude  and  as such  comtemplates  "manufacture  of chemical  products  of any nature and  kind  whatsoever  and particularly of Carboxy Methyl Cellulose, Cellulose Pulp and other  chemical products." So the High Court obviously  com- mitted an error in holding that the manufacture of Cellulose Pulp  during March 1961 was of no consequence and  that  the first year of production would be the assessment year  1962- 63 when Carboxy Methyl Cellulose was actually  manufactured. The  provisions of section 84 of the Act could be  coustrued liberally  only, when there is any genuine doubt  about  the interpretation. [892H-893G, 894B]      In the instant case, a plain reading of Sub-section (7) of  the  section 84 of the Act makes it  clear  without  any doubt  that  the period of assessment year relevant  to  the previous year in which the undertaking began to  manufacture or  produce "articles" was 1961-62. The question as  to  the assessment year in which the undertaking begins to  manufac- ture or 890 produce articles is essentially a question to be decided  on the  facts of each case and on the basis of evidence  placed on record. [894C-D]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1314 (NT) of 1976.     From  the  Judgment and Order dated  15.11.1975  of  the Gujarat High Court in Income Tax Reference No. 160 of 1974.     Dr. V. Gauri Shankar, Manoj Arora and Ms. A.  Subhashini

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for the Appellant.     J. Vellapaly, Ms. A.K. Verma and J.B. Dadachanji for the Respondent. The Judgment of the Court was delivered by     OJHA, J. This appeal has been preferred on the basis  of a  certificate granted by the High ’Court of  Gujarat  under Section  261  of the Income Tax Act, 1961  (hereinafter  re- ferred  to  as the Act). The judgment  appealed  against  is reported in Cellulose Products of India Ltd. v. Commissioner of  Income Tax, Gujarat, [1977] 110, I.T.R. page 15  1.  The respondent is a public limited company incorporated on April 14,  1989 mainly for the purpose of carrying on business  of manufacturing chemical products. The Memorandum of  Associa- tion  of  the respondent company, as is  apparent  from  the order of the Appellate Assistant Commissioner of Income Tax, inter alia contains the following clause:               "to  carry on the business of  manufacture  of               and  dealer  and importers  and  exporters  in               chemical  products  of  any  nature  and  kind               whatsoever  and particulary of Carboxy  Methyl               Cellulose   (CMC),  Cellulose Pulps and  other               chemical products." The  respondent  was granted an industrial  licence  by  the Central  Government  for the manufacture of  Sodium  Carboxy Methyl  Cellulose (for short CMC). In pursuance of the  said licence the respondent installed a Cellulose plant, in which was manufactured Cellulose pulp which in its turn was  meant to  be used as a raw material for manufacture of  CMC.  This fact  does not appear to have been in dispute that  the  re- spondent  began production of Cellulose pulp from March  18, 1961  in  the  said plant while the production  of  CMC  was started from June 15,1961. 891 In  the  assessment  year in question  namely  1966-67,  the previous  year of account being the financial  year  1965-66 ending  on  March 31, 1966, the  respondent  claimed  relief contemplated by Section 84 of the Act (as it stood prior  to its being deleted with effect from April 1, 1968 by  Finance (No.  2)  Act, 1967). The Income Tax Officer took  the  view that  since the respondent had started production of  Cellu- lose pulp from March 18, 1961 it had begun to manufacture or produce  finished  articles or goods in the year  ending  on March 31, 1961 and consequently the assessment year  1961-62 was  the  first year in which the assessee was  entitled  to relief  under Section 84. According to him, the relief  con- templated by Section. 84 being available only for five years namely  the assessment year 1961-62 and the four  assessment years immediately succeeding as contemplated by  Sub-section (7)  of Section 84 of the Act, the respondent was not  enti- tled  to the relief claimed in the assessment  year  1966-67 which fell beyond the aforesaid period. This finding of  the Income  Tax Officer was affirmed in appeal by the  Appellate Assistant Commissioner. The matter was taken by the respond- ent in further appeal before the Income Tax Appellate Tribu- nal.  The  respondent’s contention that  the  production  of Cellulose  pulp during the month of March 1961 was  a  trial production  was repelled by the Tribunal and  a  categorical finding was recorded by it that Cellulose pulp  manufactured by  the  respondent  during the month of March  1961  was  a finished  product which was a marketable commodity. On  this view  the  Tribunal held that the  respondent  having  begun production  or  manufacture of finished  product  which  was capable  of being sold in the market in the year of  account relevant  to the assessment year 1961-62, the last  year  in which  the respondent was entitled to get relief under  sec-

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tion  84 of the Act was the assessment year 1965-66 and  the claim made by it for the said relief in the assessment  year in question namely 1966-67 was not maintainable. The  Tribu- nal,  however, on an application made in this behalf by  the respondent referred the following question to the High Court of Gujarat for its opinion:-               "Whether on the facts and in the circumstances               of the case, the Tribunal was right in reject-               ing  the  assessee’s claim  for  relief  under               section 84 of the Act for the assessment  year               1966-67?" The  High  Court by the judgment under appeal  answered  the question  aforesaid in the negative, that is, in  favour  of the  assessee  and against the revenue. It  held  that  even though the word "article" used in Subsection (7) of  section 84  of the Act was undoubtedly an ordinary word employed  by the legislature but in the context in which it was used and 892 looking  to  the  object with which it was  enacted  it  was obvious  that it could only refer to the end product of  the industrial undertaking as a whole where there was no  phased programme of installation and construction. On this view the High  Court  found that the mere fact  that  the  respondent started  the production of Cellulose pulp which was  an  in- termediate  product on March 18, 1961 did not mean that  the company  had begun to produce or manufacture  "articles"  in the assessment year 1961-62.     It  has been urged by learned counsel for the  appellant that the finding recorded by the Tribunal referred to  above was  essentially  a finding of fact based  on  appraisal  of evidence and it was not open to the High Court in its  advi- sory jurisdiction to take a contrary view. For the  respond- ent, on the other hand, in support of the judgment  appealed against,  it was urged by its learned counsel that  inasmuch as  section 84 of the Act contemplated grant of relief to  a new  undertaking, it should be construed liberally so as  to effectuate the object thereof. He maintained that since  the undertaking established by the respondent was to manufacture CMC  and the industrial licence had also been granted to  it for the said purpose, exemption under section 84 of the  Act could be claimed by it only in the year during which CMC was actually  manufactured and since it was so done  during  the assessment  year 1962-63 exemption could not be  claimed  in the  assessment year 1961-62, notwithstanding the fact  that Cellulose  pulp for captive consumption was manufactured  in that  year. According to him, therefore, the period of  five years  contemplated by sub-section (7) of section 84 of  the Act would represent the assessment year 1962-63 and the four assessment years immediately succeeding and in this view  of the  matter the High Court was right in allowing the  relief claimed  by  the respondent during the  assessment  year  in question,  namely 1966-67. In the alternative, he  submitted that  if ultimately the view of the Tribunal prevailed  that the  production had started in the assessment  year  1961-62 then  the disallowance of the relief in the 5th year  namely in  the assessment year in question should be restricted  to the investment of the pulp factory and the respondent should not be denied the relief in respect of the investment exclu- sively related to the CMC plant.     Having given our anxious consideration to the respective submissions made by the learned counsel for the parties,  we are  inclined  to agree with the contention of  the  learned counsel  for the appellant that the High Court on the  facts and  in the circumstances of the instant case  committed  an error in interfering with the conclusion of the tribunal. It

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893 is  settled law that a High Court hearing a reference  under the  Act  does not exercise any appellate or  revisional  or supervisory jurisdiction over the Tribunal and that it  acts purely  in an advisory capacity. If the Tribunal after  con- sidering  the evidence produced before it on a  question  of fact  records its finding it cannot be interfered with in  a reference  by the High Court unless of course  such  finding was not supported by any evidence, was perverse or  patently unreasonable. In our opinion, the finding of the Tribunal in the  instant case did not suffer from any of these  infirmi- ties.  The  finding that the production  of  Cellulose  pulp during  the month of March 1961 was not a  trial  production and  that Cellulose pulp as manufactured by  the  respondent was a finished product which was a marketable commodity  was essentially  a  finding of fact based on appraisal  of  evi- dence.  It  is  true that  Cellulose  pulp  constitutes  raw material for manufacture of CMC but it has not been disputed before us by the learned counsel for the respondent that  it was  even  by itself a finished  marketable  commodity.  The circumstance  that  the industrial licence  granted  to  the respondent was for the manufacture of CMC and not of  Cellu- lose pulp is, in our opinion, keeping in view the nature  of the  two  articles, not of much significance.  In  the  same manner  as a licence, for instance, for the  manufacture  of cloth includes the manufacture of cotton yarn, an intermedi- ate  product necessary for manufacturing cloth, the  licence granted to the respondent for the manufacture of CMC includ- ed the manufacture of Cellulose pulp which was an intermedi- ate product to be used in its turn as a raw material for the manufacture of CMC. The relevant clause of the Memorandum of Association of the respondent company, already quoted above, is obviously wide in its amplitude, It contemplates manufac- ture of "chemical products of any nature and kind whatsoever and  particularly of CMC, Cellulose pulp and other  chemical products". Manufacture of Cellulose pulp was thus indeed one of the objects of the company. The question involved had  to be  considered  in this background and the  Tribunal  having done  so and recorded the finding of fact referred to  above the High Court obviously committed an error in holding  that manufacture  of Cellulose pulps during March 1961 was of  no consequence  and that the first year of production would  be the  assessment year 1962-63 when CMC was actually  manufac- tured.  The decision of the Madras High Court relied  on  by the  learned counsel for the respondent reported  in  Madras Machine Tools Manufacturers Ltd. v. Commissioner of  Income- Tax,  Madras,  [1975] 98 ITR 119, in view of what  has  been observed  above  on the facts of the instant case  does  not advance  the  case of the respondent any  further  than  the reasons recorded in the judgment under appeal. 894     As  regards  the  alternative  submission  made  by  the learned  counsel for the respondent suffice it to  say  that the  case on the basis of which this alternative  submission is sought to be made was not set up before the Tribunal  nor any such question was sought to be referred on the basis  of which this alternative submission could be made. It  cannot, as such, be permitted to be made in the present appeal.  The submission  that  the provisions of section 84  of  the  Act should be construed liberally so as to effectuate the object thereof  need detain us for long. It is only when  there  is any  genuine  doubt  about the interpretation  of  a  fiscal statute  or where two opinions are capable of  being  formed that the rule of interpretation canvassed by learned counsel for  the respondent may be taken to. In the instant  case  a

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plain  reading of sub-section (7) of section 84 of  the  Act makes  it  clear without any doubt that the period  of  five years was to start from the assessment year relevant to  the previous year in which the undertaking began to  manufacture or produce "articles". Since the language of the sub-section is  plain  and admits of no ambiguity there is no  scope  of applying the aforesaid rule of interpretation. The  question as  to in which assessment year "the undertaking  begins  to manufacture  or produce articles" is essentially a  question to be decided on the facts of each case and on the basis  of the evidence placed on record.     In  view of the foregoing discussion, this  appeal  suc- ceeds and is allowed with costs and the judgment of the High Court under appeal is set aside. S.B.                                                  Appeal allowed. 895