COMMISSIONER OF INCOME TAX Vs. VIJAYA RETREADERS

JUDGEMENT

(1.) This Income Tax Reference is at the instance of the Revenue under S.256(1) of the Income Tax Act. The questions referred to are as follows "1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction under S.80 I of the Income tax Act, 1961 Commissioner of Income Tax, Cochin v. M/s Vijaya Retreaders Sankarasubban, J. 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that 'the assessee was employing a process which was akin to manufacture resulting in the production of commercially a new commodity different from the old and worn out casings' and is not the above finding wrong and unreasonable in law and fact 3. Whether, on the facts and in the circumstances of the case and also in view of the fact that no new article or thing with a substantially changes identity of a product is emerged from the preretreaded tyre, the Tribunal is right in law and fact in holding that 'even if retreading does not amount to manufacture, it amounts to production' and is not the above finding wrong and unreasonable 4. Whether, on the facts and in the circumstances of the case, does retreading amount to production of an article or thing -.

(2.) The facts pertaining to the questions are as follows: The assessee is a registered firm with the previous year ending on 30th June 1986, relevant to the assessment year 1987-88. The assessee is engaged in retreading of tyre and claim for deduction under S.80-1 of the Income Tax Act (hereinafter referred to as "the Act"). This was allowed in the assessment order, dated 8th March 1988. The Commissioner of Income Tax acting under S.263 of the Act was of the view that assessee was engaged only in a manufacturing process which is not equal to the manufacturing of a new tyre and hence the deduction granted under S.80 I was erroneous and prejudicial to the interest of the revenue. Thus he directed the assessing officer to withdraw the relief granted under S.80 I of the Act. The assessee filed an appeal to the Income Tax Appellate Tribunal. The Appellate Tribunal held that the assessee was employing a process which was akin to manufacture resulting in the production of commercially a new commodity different from the old and worn cut casings. Therefore, the assessee is entitled ' to deduction under S.80 I of the Act.

(3.) We heard learned counsel for the revenue Sri P. K. Ravindranatha Menon. Learned counsel for the revenue contended that retreading is only replacing the tread. It dees not involve manufacture or production of a new article. On the other hand, learned counsel for the assessee Sri Santhosh contended that a worn out tyre by retreading becomes a new commodity and it can be used and sold as a new commodity. He further contended that the word "manufacture" in S.80 I should be given the same meaning as was given to the word in Explanation (iii) to S.10 A of the Act.