Commissioner Of Income Tax, Gujarat v. Cellulose Products Of India Ltd

COMMISSIONER OF INCOME TAX, GUJARAT A v. CELLULOSE PRODUCTS OF INDIA LTD. SEPTEMBER 4, 1991 B [S. RANGANATHAN, V. RAMASWAMI AND N.D. OJHA, JJ.] Income Tax Act 1961: Sections 84 and 261-New Industrial Undertaking-Exemption-Commencement of period-When arises. '1'he respondent is a Public Limited Company incorporated on April 14, 1989 for carrying on business of manufacturing chemical c products particularly of Carboxy Methyl Cellulose (CMC) and Cellu-lose 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 D 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 E 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 F was the first year in which the auesse e was entitled to relief under· section 84 Sub-section (7) of tile Income Tax Act under which the relief contemplated was to be available only for five aSsessment years. So. the respondent was not entitled to relief in the assessment year 1966-67 which fell beyond the afOresaid period. G The above view the lllcome Tax Officer was affirmed in appeal by the Appellate As.mtant Commissioner. Even the Income Tax Appellate Tribnnal 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 under H section 84 of the Act was the assessment year 1965-66 and the claim for the relief in the assessm-ent year 1966-67 was not maintainable. The High Court on reference, held that the mere fact that the respondent started production of Cellulose Pulp which was an interm;odiate product • . on March 18, 1961 did not mean that the company had begun to pro· duce 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, 888