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C.I.T. v. M/S R.L. Sharma - INCOME TAX REFERENCE No. 95 of 1994  RD-AH 1039 (12 April 2005)
Income Tax Reference No.95 of 1994
Commissioner of Income Tax, Meerut v.
M/s R.L.Sharma & Co., Meerut
Hon'ble R.K.Agrawal, J.
Hon'ble Rajes Kumar, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Delhi has referred the following question of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law to hold that the order passed by the Assessing Officer was not erroneous and prejudicial to the interest of Revenue?"
The reference relates to the Assessment Year 1984-85.
Briefly stated, the facts giving rise to the present reference are as follows:-
During the assessment year in question the respondent assessee had claimed deduction under Section 80HH at Rs.24.905/- and under Section 80I at Rs.24,905/- in respect of the profits of Rs.1,24,523/- at Kolab unit in Kolab Nagar, Orissa. The nature of work done by the assessee was construction of random rubble stone masonry in 1:3:4 mortar and transport of rubble. The rubble used in the machinery was digged from quarry after drilling and excavation process as also making of rubble stone in specific size and shape from boulders. The assessee claimed deduction on the ground that it had set up the industrial undertaking at Kolab Dam Works, Kolab Nagar, District Koraput, Orissa. It may be mentioned here that in the assessment year 1983-84 it had not claimed any deduction under Section 80HH and under Section 80I of the Act as its account had not been audited and a report in form no.10C and 10CCB as prescribed under the Act could not be filed. The respondent claimed that the district Koraput of Orissa State was a backward district and as it employed more than 10 works in the manufacturing process, it satisfied the condition and was entitled for deduction. It may be mentioned here that it was the claim of the respondent assessee that it was engaged in the construction of dam at Upper Kolab Dam, Kolab Nagar being a sub-contractor of M/s Hindustan Construction Company. The claim was allowed by the Assessing Officer. The records were examined by the Commissioner of Income Tax (Administration) and being satisfied that the order is not only erroneous but also prejudicial to the interest of the Revenue, initiated proceedings under Section 263 of the Act and after giving opportunity of hearing, had held that deduction under Sections 80HH and 80I of the Act had wrongly been allowed as the respondent is not an industrial undertaking. Feeling aggrieved, the respondent preferred an appeal before the Tribunal. The Tribunal has held that the order of the Assessing Authority in granting deduction cannot be said to be erroneous and prejudicial to the interest of the Revenue.
We have heard Sri Govind Krishna, learned Standing Counsel for the Revenue, and Sri R.S.Agrawal, learned counsel appearing for the respondents.
In view of the decision of the Apex Court in the case of Commissioner of Income Tax v N.C.Budharaja and Co. and another, (1993) 204 ITR 412, the respondent assessee cannot be said to be an industrial undertaking as it is not engaged in production or manufacture of any article or thing. Thus, it is not entitled to any deduction. The Commissioner, thus, rightly invoked the provision of Section 263 of the Act.
We accordingly answer the question of law referred to us in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
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