COMMISSIONER OF INCOME TAX Vs. SATELITE ENGINEERING LIMITED

JUDGEMENT

(1.) UNHAPPY as it makes us, we are obliged to decline to answer the question of law referred to us and to remit the matter to the Income -tax Appellate Tribunal for reasons which will become evident presently. An important question as to whether the assessee -company was a priority industry within the meaning of the relevant entry in Sch. VI to the I.T. Act, 1961, as it stood at the material time in the concerned assessment year (1970 -71) was decided against the assessee -company by the Commissioner of Income -tax, who did so on an interpretation of the relevant entry of the Schedule and in the light of the material placed before the competent authority by the assessee. Oblivious of these two crucial dimensions and without evincing any awareness thereof, the decision was reversed by the Income -tax Appellate Tribunal on totally irrelevant consideration by its order dated June 19, 1976, as per annex. C. That is why we will not be in a position to answer the two question referred to us as per statement of case dated March 4, 1977. We will have to adopt the course which was adopted by the Supreme Court in CIT v. Indian Molasses Co. P. Ltd. : [1970]78ITR474(SC) , and will have to remit the matter to the Tribunal for a fresh decision in the light of the opinion expressed by us in the course of this judgment.

(2.) THE two questions which have been referred to us turn on the interpretation of item No. (17) of the Schedule in the context of the benefit available under s. 80I of the Act, as it stood at the material time. They ar :

(3.) THE Commissioner approached the question as regards the right to claim the benefit under s. 80I read with Sch. VI with a focus on the interpretation of the aforesaid entry. The Commissioner has analysed item No. (17) and has taken the view that the item concerned has a restricted converge as is obvious from the circumstance that the expression 'electronic equipment' is followed immediately by the term 'namely' indicating that the items enumerated thereafter are the items falling within the sweep of the expression preceding the term 'namely'. The Commissioner has enumerated the electronic equipments specifically named in item (17) and has further proceeded to observe that the basic components referred to in the second part of item No. (17) must be the basic components of the electronic equipment as specified in the first part of item No. (17). In this view of the matter, he came to the conclusion that the ITO was in error in granting relief under s. 80I of the Act. In order to overturn the decision of the Commissioner, the Tribunal was of necessity required to examine the validity of the logical basis and the reasoning adopted by the Commissioner. If the Tribunal came to the conclusion that any error of fallacy had crept into the reasoning underlying the decision, the Tribunal had undoubted jurisdiction to reverse it. But before doing so, the basic premises on which the decision was erected and the validity of the propositions formulated by him had to be examined. Only thereafter in case an error was detected in the reasoning, the finding could have been reversed after demolishing the structure of the basis of the Commissioner's reasoning. The Tribunal also failed to do what was incumbent on it to do in order to reverse the decision of the Commissioner. The Tribunal shut its eyes to the basic reasoning and structure of the decision of the Commissioner, refused to look at it or counter it by a rational process, but instead, built its decision on an altogether irrelevant circumstance on which nothing turned. It is a good illustration of non -nexus between the irrelevant circumstance and the conclusion. The conclusion is of the nature of non sequitur. The Tribunal, saying so with respect, made an altogether unwarranted and unrealistic approach. The Tribunal felt obsessed by the circumstance that the assessee -company had supplied its articles mainly to (1) Philips India Ltd., (2) Bajaj Electronics, and (3) Greaves Cotton. The Tribunal appears to have been overawed by the impression (may be a justified one) that these well -known companies manufacture sophisticated electronic goods. From these two postulates the Tribunal frog leaped to the impossible conclusion that items manufactured by the assessee -company, namely, fluorescent lamp starters and glow lamp switches, would fall under item No. (17) of Sch VI and would be eligible for relief under s. 80I of the Act. We can do no better than for the sake of fitness) to quote the reasoning of the Tribuna :