ALLEPPY CO LTD Vs. CIT KERALA

JUDGEMENT

(1.) THE Income-Tax Appellate Tribunal, Cochin Bench, has referred the following question of law for our opinion: "whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the reopening of the assessment under S. 147 (b) is valid?" For the assessment year 1965-66 the assessee, a Company, was assessed by the Income-tax Officer by his order dated 30th November 196 5. That order shows, among other things, that rebate on export profits was granted to the assessee Company at 4. 6 per cent. THEre was an inconsequential order of rectification dated 11th August 196 6. An appeal against this order was dismissed on 25th June 196 8. Meanwhile, by an order dated 29th February 1968, there was a further rectification of the order of assessment, the officer holding that the assessee should be treated not as a Public limited Company but only as one in which the public are substantially interested, and that therefore the assessee would be entitled to rebate only at 20 per cent on export profits and not at the higher rate of 30 per cent. THE assessee appealed to the Appellate assistant Commissioner contending that it was a manufacturing Company and not a trading Company. THE Appellate Assistant Commissioner allowed the appeal and directed the Income-tax Officer to examine the question. THE officer, by his order dated 22nd February 1969 (Annexure-F) held that the assessee was a manufacturing company entitled to rebate at 30 per cent on its export profits. THE succeeding officer took the view that the question whether a Company was mainly engaged in the business of manufacture in accordance with the provisions of the Finance act, 1965, had not been considered at all by his predecessor Income-tax officer; and therefore, he revised the assessment holding that the Company was not mainly engaged in the manufacture or processing of goods as the income from these operations came to less than 51 percent, (Annexure-G ). Against the said order the assessee preferred an appeal to the Appellate Assistant Commissioner, which was rejected by him (Annexure-H), THE Tribunal also rejected the assessee's appeal on this point, (Annexure-I ). It, however, formulated the question of law noticed earlier and forwarded the same for the opinion of this court.

(2.) THERE is no controversy that the question as to whether the assessee was a trading Company or a manufacturing Company, had to be decided in the light of the provisions of the Finance Act, 1965. Under the provisions of that Act rebate is to be allowed in the case of a Company which is not a Company in which the public are interested and which is wholly or mainly engaged, inter alia, in the manufacture or processing of goods at 30 per cent. THERE was a proviso to this provision, and Explanation I to the said proviso enacted that "for the purposes of this provision or paragraph, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of 'goods or in mining, if the income attributable to any of the aforesaid activities included in its total income for the previous year is not less than fifty-one per cent of such total income. " The Income-tax Officer who issued the reassessment order (Annexure-G) dated 8th October 1970 was of the view that the original assessment order dated 30th November 1965 was passed without reference to the provisions of the Finance Act, 1965, and for that reason, required rectification. It was this view that was sustained on appeal by the Appellant assistant Commissioner and on further appeal, by the Tribunal.

(3.) WE are of the opinion that on the facts disclosed, the income-tax Appellate Tribunal was correct in its view. WE answer the question of law referred to us in the affirmative, i. e. , in favour of the department and against the assessee. The assessee will pay the costs of this reference. . .