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C.I.T., Lucknow v. M/S. Faizan & Co. Moradabad - INCOME TAX REFERENCE No. 52 of 1986 [2005] RD-AH 284 (31 January 2005)


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I,T.R. No. 52 of 1986

CIT  Vs. M/s. Faizan & Company, Moradabad.

Hon'ble R.K. Agrawal, J.

Hon'ble Prakash Krishna, J.

(Delivered by Hon. P.Krishna, J)

The Income Tax Appellate Tribunal, Delhi has referred the following two questions of law under Section 256 (1) 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 learned Tribunal was legally justified in  holding that the assessee was a recognized export house and a small scale exporter who was manufacturing and producing articles and hence was entitled to weighted deduction u/s.35 B of the I.T. Act, 1961?"

2. Whether on the facts and in the circumstances of the case, the case of the assessee fell under the definition of Small Scale Industrial Unit?"

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

The reference relates to the assessment year 1978-79 with the previous year having ended on 31st March, 1978. The assessee is a resident registered firm and claimed weighted deduction under section 35- B of the Act on the ground that it is engaged in the process of manufacturing  i.e. purchasing of  kora mal   and getting it polished and engraved  etc.  After getting the good finished  it is exported. The assessee firm is exclusively  engaged in export business of  brassware. The Income Tax Officer did not allow the weighted deduction under section 35 - B  on the ground that the assessee is not a holder of Export House Certificate nor a Small Scale Industry. The said question of the order was confirmed in appeal by the Commissioner of Income Tax (Appeals). He also found that admittedly the assessee was not having  Export House Certificate. However, its plea that it should be considered  as a Small Scale Exporter was rejected,  in view of the definition of the term given in Explanation (a) to Sub-section (1A) of Section 35-B. For a Small Scale Exporter it is necessary that the Industrial Undertaking or  the Undertakings should be owned by him. On further appeal the Tribunal granted weighted deduction under section 35-B of the Act.

We have heard Shri Govind Krishan, learned Standing Counsel for the Revenue. He placed reliance upon a judgment of this Court delivered on 1st of September, 2004  in ITR 219 of 1984 CIT Lucknow  Vs. M/s. United Trading Corporation, Moradabad. None appeared on behalf of the assessee respondent.  The case was listed peremptorily today in pursuance of the order dated 5th of January, 2005, wherein it is mentioned that on the previous five occasions whenever the case was listed the learned counsel for the assessee had sent illness slip and the case was passed over. Vide order dated 5th of January, 2005 the case was directed to be listed in the next cause list peremptorily. Today again illness slip has been sent by the learned counsel for the assessee. Court  proceeded to hear and decide the case in absence of the learned counsel for the assessee - respondent and did not honour the illness slip being an abuse of the process of the Court.

We have examined the above  questions in detail in  ITR No.34 of  1986  Orient Arts and Crafts vs. CIT. It has been held  that it is necessary for the assessee to own the industrial undertaking or undertakings to qualify as Small Scale Exporter within the meaning of Section 35-B (1 A) Explanation (a) of the Act. In this case indisputably the assessee is not  holder of an Export House Certificate. There is no finding by any of the authorities including the Tribunal that the assessee owns any undertaking or undertakings. The Tribunal has proceedings on the footing that it is not the requirement of the Act to qualify as Small Scale Exporter for a person to own undertaking or undertakings. Therefore, the order of the Tribunal cannot be sustained.

The judgment of   CIT vs. M/s. United Trading Corporation ITR No.219 of 1984, referred by the learned standing counsel has no application to the facts of the present case in as much as that was a case of assessee who was a recognized export house and was holder of export house certificate.  

In the result, we answer the question referred to us in negative i.e. in favour of the  Revenue and against the assessee. However, there shall be no order as to costs.

Dt. 31.1.2005



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