Bombay High Court
Commissioner Of Income-Tax vs Mansinghka Oil Mills Private Ltd. on 26 March, 1987
Equivalent citations: [1988]169ITR158(BOM)
JUDGMENT Sugla, J.
1. The only question of law referred to this court for opinion at the instance of the Revenue is :
"Whether, on the facts and in the circumstances of the case, and in law, the relief under section 80-I of the Income-tax Act, 1961, is to be granted with reference to the composite profits or with reference to the proportionate profits on the cotton seed oil alone, being item No. 25 of Schedule VI to the said Act ?"
2. The facts are not in dispute. The assessee is a private limited company. It carries on the business of manufacture and sale of cotton seed oil, that is, vanaspati oil. For the assessment year 1970-71, the assessee claimed deduction under section 80-I of the Income-tax of the Income-tax Act, 1961, on its profits from the aforesaid business. Observing that the profits on which relief was claimed under section 80-I included profits on the sale of cotton seed oil-cake, cotton seed lint and cotton seed husk, etc., which do not qualify for the relief under that section, the Income-tax Officer restricted the relief on the profits from the manufacture and sale of cotton seed oil only. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. The Income-tax Appellate Tribunal, however, accepted the assessee's claim, holding that the assessee was entitled to deduction under section 80-I in respect of its entire profits which were attributable to the activity of manufacture and sale of cotton seed oil, that is, "priority industry".
3. There is no dispute that section 80-I of the Income-tax Act, 1961, was in force during the previous year involved herein, that the section provided for deduction in respect of 8% of the profits and gains attributable to any priority industry, that the expression "priority industry" is defined in section 80B(7) of the said Act, inter alia, meaning manufacture of any one or more of the articles or things specified in the list in the Sixth schedule to the said Act and that cotton seed oil is item No. 25 in the list of articles and things in the Sixth Schedule. The short question that arises for consideration, therefore, is whether the expression "profits and gains attributable to" priority industry means the profits directly relatable to the manufacture and sale of cotton seed oil or whether it means and includes all profits and gains which are attributable to such an industry. The question requires to be considered in the light of the categorical finding given by the Tribunal in its impugned order that cotton seed oil-cake, lint, husk, etc., are by-products in the business of manufacture and sale of cotton seed oil.
4. The above facts are very near to the facts in the case decided by the Calcutta High Court in CIT v. Sutna Stone and Lime Co. Ltd. [1982] 138 ITR 37. The assessee in that case was carrying on business of manufacture and sale of limestone on its quarries which admittedly constituted a "priority industry" within the meaning of section 80-I of the Income-tax Act, 1961. In the course of its above business, the assessee was also deriving profits from the manufacture of lime. The question had arisen whether the profits derived from manufacture and sale of lime were attributable to the "priority industry". The Tribunal had found as a fact that the production of lime and the production of limestone are integrated composite parts of the one productive activity of the assessee. On the above finding, it was held that the profits derived by the assessee from the manufacture and sale of lime were attributable to "priority industry" so as to qualify for relief under section 80-I. As against this, the assessee, in the case decided by the Madras High Court in CIT v. Coromandal Prodorite Private Ltd. [1978] 111 ITR 132, was engaged in the manufacture of prodorite (acid-resisting cement), a priority industry, within the meaning of section 80-I. In addition, it undertook contracts for laying acid-resisting floors and other constructions in factories and also dealt in acid-resisting floors and other constructions in factories and also dealt in acid-resisting bricks. The assessee had suffered losses in the latter activities. It was the case of the Revenue that the assessee company was entitled to relief under section 80-I on the net total income, that is, income derived from priority industry as reduced by the losses in the aforesaid other activities. The question, therefore, was whether losses suffered by the assessee from the contracts for laying acid-resisting floors and other constructions in factories and also from dealing in acid-resisting bricks were attributable to the priority industry so that the assessee would be entitled to relief under section 80-I on the net total income. There was no finding in the case that all these activities were integrated part of the activity of priority industry. It was held that the assessee was entitled to relief under section 80-I on the profits of the priority industry and not the net profits from all its activities. In the case before us, the Tribunal has given a categorical finding that the cotton seed cake, lint and husk, etc., are by-products in the business of manufacture and sale of cotton seed oil, that is, the priority industry. In the circumstances, the decision of the Calcutta High Court is applicable to the facts of the case in hand and not the decision of the Madras High Court.
5. Accordingly, we hold that the assessee's business of manufacture and sale of cotton seed oil is a priority industry and that all profits and gains attributable to such a priority industry qualify for deduction under section 80-I of the Income-tax Act, 1961.
6. In the above view of the matter, the question is answered thus : The relief under section 80-I of the Income-tax Act, 1961, is to be granted with reference to the composite profits of the priority industry and not with reference to the proportionate profits as computed by the Income-tax Officer.
7. No order as to costs.