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C.I.T. v. Plastic Products - INCOME TAX REFERENCE No. 245 of 1980 [2004] RD-AH 420 (2 August 2004)


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Court No.37

Income Tax Reference No.245 of 1980

Commissioner of Income Tax v. M/s Plastic

Products Limited, Kanpur

Hon'ble R.K.Agrawal, J.

Hon'ble K.N.Ojha, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-  

"1. Whether on the facts and in the circumstances of the case, The Income Tax Appellate Tribunal was legally correct in holding that the plastic manufactured by the assessee was petro-chemical within the meaning of item no.18 of the Sixth Schedule and hence entitled to the relief u/s. 80-I read with section 80-B(7) of the Income Tax Act?

2. Whether on the facts and in the circumstances of the case, The Income Tax Appellate Tribunal was legally justified in holding that the assessee was entitled to the allowance of development rebate at the higher rate of 35% u/s.33(1)(b)(B)(i)(a) of the Income Tax Act?"

Briefly stated, the facts giving rise to the present reference are as follows:-

The respondent assessee is a company engaged in manufacture of plastic goods and certain machinery parts for the use by sister concerns. The matter relates to the Assessment Year 1970-71, relevant accounting year ending on 20th June 1969. In the income tax return and during the assessment proceedings, the respondent assessee claimed deduction under Section 80-I read with section 80-B(7) of the Act in respect of its profits and rebate at the higher rate of 35% under Section 33(1)(B)(i)(a) of the Act for the plant and machinery used for the manufacture of plastic. The respondent assessee explained to the Income Tax Officer the circumstances under which he was entitled to claim deduction and higher rate of development rebate, which the Income Tax Officer did not accept as the respondent assessee utilized the raw materials which were petro-chemicals.  According to him, the assessee neither manufactured any petro chemical products from the petroleum base nor any corresponding synthetic product from hydro carbons or other raw materials noted in item 18 of VI Schedule to the Act. He, therefore, concluded that the assessee was not engaged in priority industry. The Income Tax Officer further held that the assessee had not maintained any separate account of manufacture of machinery parts for the use by sister concerns and its claim was not verifiable. In appeal though the respondent assessee reiterated the aforesaid contentions, the Appellate Assistant Commissioner upheld the order of the Income Tax Officer. The respondent assessee went up in appeal before the Tribunal. Inviting the attention of the Tribunal to its explanation, extract from Hackh's Chemical dictionary, the opinion of Dr. G.N.Mathur, a decision of ''D' Bench Bombay in the case of Nirlon Synthetic Fibres and Chemicals Ltd. Bombay and the opinion of Shri Palkivala, the assessee urged that it was engaged in priority industry. The Revenue, however, justified the orders of Income Tax authorities. The Tribunal accepted the submissions made on behalf of the respondent assessee and held that the respondent assessee was entitled to deductions under Section 80-I and 33(1)(h)(B)(i)(a) of the Act.

We have heard Sri A.N.Mahajan, the learned counsel for the Revenue and Sri V.K.Upadhaya, the learned counsel appearing for the respondent assessee.

The question as to whether the plastic manufactured by the respondent assessee was petro chemical or not has been considered by the Apex Court in the case of J.K.Synthetics Ltd. v. Commissioner of Income Tax, (1981) 130 ITR 23 and Commissioner of Income Tax v. Nirlon Synthetic Fibres & Chemicals Ltd. (1981) 130 ITR 14 and it was held that the plastic manufactured by the assessee was petro chemical within the meaning of Item No.18 of the Sixth Schedule and was entitled to relief  under Section 80-I read with Section 80-B(7) of the Act and also the development rebate.

Respectfully following the aforesaid decision, we answer both the questions in the affirmative in favour of the respondent assessee and against the Revenue. However, there shall be no order as to costs.




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