COMMISSIONER OF INCOME TAX Vs. SUNDARAM CLAYTON LIMITED

JUDGEMENT

(1.) IN these two references, the following common question of law has been referred to this court:

(2.) THE assessee is a company carrying on the business in the manufacture and sale of air-compressor equipments for automobile vehicles. It had taken sub-contracts from various other companies connected with the manufacture of automobile spare parts, and sold scraps, being the by-product of its manufacturing activities. THE original assessment on the asses-sec for the assessment years 1968-69 and 1969-70 were made on March 31, 1971, and April 2, 1971, respectively, allowing the relief under Section 80-I with reference to the income from the sub-contract also. Subsequently, the ITO was of the view that the relief under Section 80-I had been granted not only on the income relating to the priority industry but also on the income from non-priority industry. He issued notices to the assessee proposing to rectify the assessment. Subsequently, the ITO passed orders rectifying the assessments for the assessment years 1968-69 and 1969-70. In doing so, he granted relief under Section 80-I only on Rs. 3,96,775 computed as the income relating to priority industry for the assessment year 1968-69. Similarly, for the assessment year 1969-70, the relief was granted only on a sum of Rs. 1,97,154. THE assessee appealed to the AAC contending that the ITO was not justified in treating Rs. 6,472 and Rs. 38,388 as income relatable to a non-priority industry. THE AAC accepted the assessee's submissions holding that the relevant amounts were relatable to a priority industry. THE department appealed to the Tribunal. But the Tribunal confirmed the order of the AAC. THE matter has now been brought on reference to this court at the instance of the Commissioner of Income-tax.