Kerala High Court
Mount Senai Hospital vs Income-Tax Officer And Another. on 29 May, 1991
Equivalent citations: [1992]193ITR772(KER)
JUDGMENT
K. A. NAYAR, J. - The original petition is to quash the order of the Commissioner of Income-tax, Kochi, passed under section 264 of the Income-tax Act refusing to revise the assessment order for the year 1985-86. Admittedly, the assessment order for 1985-86 has been the subject-matter of an appeal before the appellate authority and the appellate order has become final. Assessment order for the year 1985-86 was sought to be revised under section 264 and the Commissioner rejected the application on the ground that an application to revise the order under section 264 cannot lie as section 264 (4) (c) clearly provides that the Commissioner shall not revise any order under section 264 if the order has been made the subject-matter of an appeal to the Commissioner of Income-tax (Appeals). In this case, there is no dispute that the order has been made the subject of an appeal to the Commissioner of Income-tax (Appeals). Hence, I find no irregularity or illegality or illegality in the order sought to be quashed in this original petition.
Without prejudice to the right of the petitioner, if any, to agitate the matter in appropriate proceedings, the original petition is dismissed.
Income-tax Reference No. 445 of 1977, decided on 12 April, 1991.
JUDGMENT T. D. SUGLA, J. - In this reference at the instance of the assessee relating to its assessments for assessment years 1966-67 and 1967-68, the Tribunal has referred to this court the following question of law for opinion under section 256 (1) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the applicant-company was engaged in the manufacture of tea and entitled to the rebate as claimed by the assessee and allowed by the Income-tax Officer as per section 2 (5) (a) (ii) of the Finance Acts of 1966 and 1967 in the order passed under section 154 for the assessment years 1966-67 and 1967-68 ?"
The assessee-company, inter alia, is an exporter of tea. While completing the assessments originally, the Income-tax Officer had not considered the assessees claim for rebate on export of tea which the assessee had claimed in its returns. The assessee invited the Income-tax Officers attention by writing two separate letters to the effect that he had not considered the assessees claim. The Income-tax Officer passed orders under section 154 for the two years on May 7, 1971, and allowed rebate on export profits as per the assessees claim without discussing the matter. The Additional Commissioner of Income-tax felt that the Income-tax Officer had wrongly allowed the relief/rebate to the assessee while passing orders under section 154. Accordingly, after allowing the assessee an opportunity of being heard, he passed orders under section 263 of the Income-tax. Act holding that the allowance of rebate for the two years in the rectification proceedings by the Income-tax Officer were erroneous and prejudicial to the interests of the Revenue. He observed that the claim of the assessee was of a controversial nature and could not be considered in the rectification proceedings under section 154. Even on merits, the Additional Commissioner was of the view that the assessee was not a manufacturer of any article and mere blending of tea could not constitute a manufacturing activity as held by the (BOM)bay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of (BOM)bay [1959] 10 STC 500.
The matter came up in appeal before the Tribunal at the instance of the assessee. We are not at present concerned with the question whether or not the Income-tax Officer could have considered the assessees claim in proceedings under section 154 as no such question has been raised or referred to us by the Tribunal. On merits, the Tribunal has also concluded that the assessees activity of blending of different kinds of tea could not constitute manufacturing activity so as to bring it within the purview of section 2 (5) (a) (ii) of the Finance Act, 1966. Accordingly, the Tribunal confirmed the order of the Additional Commissioner.
Placing reliance on the Calcutta High Court decision in the case of G. A. Renderian Ltd. v. CIT [1984] 145 ITR 387 and the Gujarat High Court decision in the case of CIT v. Ajay Printery Pvt. Ltd. [1965] 58 ITR 811, Shri Mehta tried to support his claim that blending of tea constituted manufacturing activity. He pointed out that, in the Calcutta case, the facts were identical. The question considered was whether the assessee was an industrial company under section 2 (7) (c) of the Finance Act, 1978, and the court held that it was so. In the Gujarat case, the assessee was carrying on the business of a printing press. It was printing calendars, profit and loss accounts and balance-sheets of companies. The question was whether the particular unit of the assessee was carrying on a manufacturing activity for the purpose of section 23A. It was held that the assessee was carrying on a manufacturing activity. Dr. Balasubramanian, learned counsel for the Revenue, on the other hand, strongly relied on the judgment of our court in Nilgiri Ceylon Tea Supplying Co. v. State of (BOM)bay [1959] 10 STC 500, where, though in the context of sales tax, our court held that blending of tea was not a manufacturing activity.
We have considered the rival contentions carefully. We have also gone through the judgments relied upon. It our opinion, the Calcutta High Courts decision in G. A. Renderian Ltd. v. CIT [1984] 145 ITR 387 is not applicable in this case inasmuch as section 2 (7) (c) of the Finance Act, 1978, defined an industrial company, inter alia, as one which is engaged in the processing of goods. It is pertinent to mention that the expression provisions of section 2 (5) (a) (ii) of the Finance Acts, 1966 or 1967, with which we are concerned in this reference. As regards the Gujarat decision, it is to be borne in mind that the question in that case again was, as stated by the learned judges in the first sentence of their judgment, as to the interpretation of the words "in the case of an Indian company whose business consists wholly in the manufacture or processing if goods" occurring in Explanation II to section 23A of the Indian Income-tax, 1922. We have already stated that, in section 2 (5) (a) (ii) of the Finance Act, 1966 and 1967, the expression "processing of goods" is conspicuous by its absence. For the sake of ready reference, it is desirable to refer to the provisions of section 2 (5) (a) (ii) applicable for the assessment years 1966-67 and 1967-68 :
"(5) (a) In respect of any assessment for the assessment year commencing on the 1st day of April, 1966, in the case of an assessee being a domestic company or an assessee other than a company,...
(ii) where he is engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951), and has, during the previous year, exported such articles out of India, he shall be entitled, in addition to the deduction of income-tax referred to in sub-clause (i), to a further deduction, from the amount of income-tax with which he is chargeable for the assessment year, of an amount equal to the income-tax calculated at the average rate of income-tax on an amount equal to two per cent. of the sale proceeds receivable by him in respect of such export."
In view of the material difference in the language of the provisions with which we are here concerned and in view of our courts judgment in Nilgiri Ceylon Tea Supplying Co. v. State of (BOM)bay [1959] 10 STC 500, we are inclined to agree with the Tribunal that mere blending of tea for the purpose of export does not constitute manufacture of articles within the meaning of section 2 (5) (a) (ii). Accordingly, we would answer the question referred to us by the Tribunal in the negative and in favour of the Revenue.
No order as to costs.