Jharkhand High Court
M/S Parikh Engg.& Body vs C.I.T.Biharii,Ranchi on 19 April, 2012
Equivalent citations: 2012 (4) AIR JHAR R 123, 2012 TAX. L. R. 578 (2012) 4 JCR 25 (JHA), (2012) 4 JCR 25 (JHA)
Bench: Chief Justice, Aparesh Kumar Singh
1 IN THE HIGH COURT OF JHARKHAND AT RANCHI Tax Case No. 20 of 1990(P) .....
In the matter of Reference made under Section 256(1) of the Income Tax Act, 1961.
....
M/s Parikh Engineering & Body Building
Ltd. , Jamshedpur ...... Petitioner
Versus
Commissioner of Income Tax,
BiharII,Ranchi .... Respondent
CORAM : HON'BLE THE CHIEF JUSTICE
HON'BLE MR.JUSTICE APARESH KUMAR SINGH
...
For the petitioner : Mr.S.L.Agrawal, Advocate For the Respondent: M/s Deepak Roshan, Sr.S.C.(I.T.) , Amit Kumar & Rupa Kumari, Advs.
Reportable Dated19
th
April, 2012
....
By Court Heard learned counsel for the parties.
2. The following questions have been referred to this Court by the order of the Income Tax Appellate Tribunal, Patna Bench, Patna in R.A. No. 27(Pat)/1989, relating to the assessment year 198182:
"1. Whether on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the petitioner is not entitled to the claiming investment allowance on the basis of explanation inserted by Finance Act, 1987 w.e.f. 1.4.1988 when the claim of petitioner is in the year 198182 ?
2. Whether on the facts and in the circumstances of the case, the finding of the Tribunal is perverse in holding that blending flavouring concentrates includes synthetic essence ?
3. Whether in the facts and circumstances of the case whether the order passed by the Tribunal is legally correct in holding that the product of the petitioner industry covers under list 5 of Eleventh Schedule and as such is not entitled for investment allowance in spite of the fact that the matter has been decided by Bombay High 2 Court in the case of Duke and Company that while manufacturing soft drinks like Thumpsup, Limca or Gold Spot any blending flavouring concentrates is not being used ?
3. As per the statement of facts given, the AssesseeCompany is manufacturer of soft drinks like Thumps Up, Gold Spot etc. In the process of manufacturing of soft drinks the petitioner used synthetic flavouring essence, which, according to the petitioner, is not the form of concentrates like natural concentrates, which may be used for blending and flavouring of the soft drinks. The petitioner's plant and machineries used for manufacture of an article specified in the list of Eleventh Schedule and particularly in Entry5 of the Eleventh Schedule on which, according to the petitioner, investment allowance is allowable under Section 32A of the Income Tax Act, 1961. The petitioner's claimed the deduction of investment allowance but the same was disallowed by the Assessing Officer on the ground that the claim was not made in the original return and the goods manufactured by the petitioner comes under the goods mentioned in the list in Eleventh Schedule for the purpose of grant of investment allowance being item no.5 of the Eleventh Schedule of the Income Tax Act. The petitioner preferred an appeal against the said order before the Commissioner of Income Tax(Appeals), who allowed the appeal of the assessee holding that the revised return filed by the petitioner should be held to be valid return since the petitioner had filed extension in form no.6 and no rejection order was communicated to the petitioner. The Appellate Authority further held that in that view of the matter the return filed by the petitioner is a return under Section 139(4) and hence it is a valid return. The 3 learned Commissioner of Income Tax(Appeals) further held that the petitioner essentially is entitled for the claim of investment allowance as it does not fall within item no.5 of Eleventh Schedule. The learned Commissioner of Income Tax(Appeals) held that there is distinction between "blended flavouring concentrates" and "synthetic flavouring essence" and petitioner was not using any blended flavouring concentrates in any form and as such is entitled to the benefit because of the investment allowance. The learned Appellate Authority relied upon the judgment of the Bombay High Court delivered in the case of Duke & Sons Ltd. Vrs. Superintendent of Central Excise , reported in 2000(126)ELT 574.
The Revenue Department has preferred appeal before the Tribunal against the order of CIT(Appeals) and the Tribunal accepted the appeal and rejected the claim of the petitioner on the basis of an explanation inserted by Finance Act, 1987 with effect from 1st April, 1988. The Tribunal opined that in view of the explanation inserted with effect from 1st April, 1988 blended flavouring concentrates include synthetic essence, even if the said explanation was inserted much after the period relevant for the purpose of assessment.
4. In the background of these facts, the above questions were referred to this Court by the Tribunal.
5. It appears that question no.1 alone will answer the entire controversy and , therefore, we deem it proper to decide question no.1 and there is no need to decide other questions.
6. Learned counsel for the petitioner vehemently submitted that the explanation added in Eleventh Schedule to the Income Tax Act has been considered by the C.B.D.T. where it has been clearly opined 4 that the amendment made by Section 73 of the Finance Act, 1987 shall be applicable prospectively for the assessment year 198889 and subsequent years. Learned counsel for the assessee vehemently submitted that the blended flavouring concentrates are separate and distinct commercially known article and at the same time the essence is also commercially known article, as has been held by the Bombay High Court in the case of Duke & Sons Ltd. Vrs. Superintendent of Central Excise (supra) and, therefore, by no stretch of imagination, the essence can be included in the definition of "blended flavouring concentrates". It is also submitted that the Circular of the C.B.D.T. which is given due recognition by the Courts also has clearly opined that the amendment shall be prospective from the subsequent years whereas the petitioner's assessment year is 198182.
7. Learned counsel for the Revenue vehemently submitted that firstly the words used in Entry 5 of the Eleventh Schedule are very wide enough, which includes every material which can be used for blending, flavouring and which is concentrate. It is submitted that explanation appended under Entry 5 of the Eleventh Schedule is only clarificatory which clarified what was the position at the time when Entry 5 was framed in Eleventh Schedule and it is not the charging section and, therefore, it is not retrospective operation of the Finance Act, 1987 but this only clarified what was intended by the Legislation when Entry 5 was incorporated in the Eleventh Schedule.
8. We have considered the submissions of the parties and perused the reasons given in the case of Duke & Sons Ltd. Vrs. Superintendent of Central Excise (supra) as well as the Circular of the C.B.D.T. . We are of the considered opinion that even if blended 5 flavouring concentrates are commercially known differently, separate and distinct article and essence is separate and distinct article, even though, essence if are used for the purpose of blending and flavouring purposes as concentrate, then it is also included in the words used in Entry 5 of Eleventh Schedule which are made wide enough to include any concentrate which is used for blending and flavouring purposes which is clear from the words used in last line of Entry 5 "in any form". Such article must fulfill requirements that it is used for blending and flavouring and it must be concentrate. Therefore, essences which are artificial are not excluded from the Entry 5 and Entry 5 nowhere says that only natural concentrates are covered under Entry 5. Therefore, merely because by one clause made in Entry 5 of Eleventh Schedule which included all such concentrates, it cannot be held that it was intended to include only one form of concentrate. Therefore, it is true that essences are distinct from natural blending and flavouring article yet they are covered in Entry 5 of Eleventh Schedule.
9. Be that as it may, the explanation appended to Entry 5 of the Eleventh Schedule expressly made it clear as explanation is clarificatory in nature. Even in view of C.B.D.T. Circular, which is clear from Circular itself, it appears that petitioner's counsel tried to read Clause 43.1 of the Circular with the help of para 43.3 whereas the effect of the explanation under Entry 5 of the Eleventh Schedule has been considered in para 43.1 itself by the C.B.D.T., wherein it has been clearly mentioned that it was found that certain persons manufacturing aerated waters are using synthetic essence and are claiming the benefit on the ground that synthetic essence cannot be 6 included in the expression "blended flavouring concentrates in any form". Then the C.D.B.T. observed that as this was not the intention of the legislation, the amending Act has inserted an explanation to item 5 of the Eleventh Schedule which clarifies that blended flavouring concentrates include the synthetic essences in any form. Therefore, the explanation is clarificatory and not the charging section. By the same Section 73 of the Finance Act, 1987, item no.22 of the Eleventh Schedule was also amended . As per that, in item no.43.3 of the Circular of the CBDT, it has been made clear that said amendment of item no.22 will come into force from 1st April, 1988 and will, accordingly, apply in relation to assessment year 198889 and for subsequent years. The interpretation given for Entry no.22 has no application to explanation to Entry No.5.
10. Therefore, in our considered opinion, the essence used for the blending and flavouring purpose for aerated waters was covered by Entry no.5 in Eleventh Schedule and Reference is answered accordingly and, therefore, the decision given by the Tribunal dated 13th April,1989 has been rendered by correct interpretation of the above provisions.
11. Reference is answered accordingly.
( Prakash Tatia, C.J. ) ( Aparesh Kumar Singh, J.) G.Jha/