CARBORUNDUM UNIVERSAL LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS petition is for a rule of mandamus directing the respondent, Union of India, represented by the Ministry of Finance, to issue a recognition that the Central Government is satisfied that the petitioners are engaged in the manufacture of one or more of the articles specified in Part A of the Fifth Schedule to the IT Act, 1961. The petitioners are a public limited company incorporated in 1954 and are said to be engaged during the relevant time in the manufacture of grinding wheels and abrasives, being the industrial machinery specified in sub -cl. (iii) of cl. C of Part A of the Fifth Schedule to the IT Act. The petitioners, as they aver, are assessed to income -tax by the First ITO, City Circle, for 1960 -61 and 1961 -62, and in the course of these assessments they claimed that their profits in the manufacture of grinding wheels were exempt from IT under S. 15C of the Indian IT Act, 1922. This contention, according to the petitioners, was accepted, and exemption granted under that provision. After the coming into force of the new Act w.e.f. 1st April, 1962, which would have effect on the petitioners' assessments for 1962 -63, the petitioners claimed that the profits in the manufacture of grinding wheels satisfied the conditions prescribed in the Fifth Schedule to the Act and, therefore, any dividend distributed by the petitioners to its corporate shareholders would be exempt from super -tax in the assessments of the corporate shareholders under cl. (iv) of sub -s. (1) of S. 99 of the IT Act, 1961. Under the relevant statutory provisions a prerequisite for exemption of such super -tax would be the satisfaction of the Central Government that the petitioners are wholly or mainly engaged in an industry for the manufacture or production of one or more of the articles specified in any of the items in Part A of the Fifth Schedule. They, therefore, made an application on 18th April, 1963, to the Central Board of Revenue for recognition as a company engaged in the manufacture of bonded abrasives, which, we are told, is a comprehensive expression to include grinding wheels and other articles of a similar nature produced by the same process. After prolonged delay and calling for particulars more than once at various levels, the Under Secretary to the CBDT, by a communication dt. 4th March, 1964, intimated the petitioners with reference to their application that the Board of Revenue had considered the matter, but it regretted that the request regarding exemption contemplated under the Fifth Schedule r/w S. 99(1) (iv) of IT Act, 1961, could not be acceded to. There was a further communication on 14th May, 1964, from the Secretary to the CBDT to the petitioners to the effect that if the other condition in sub -cl. (2) of r. 1 of the Fifth Schedule was not fulfilled, which would disentitle the shareholders to the claim for exemption on that ground alone, the question of the Central Government satisfying itself about the condition in sub -cl. (1) of the rule did not arise. It is in these circumstances that the petitioners have approached this Court for a direction as aforesaid.

(2.) ON the view we take, we think it unnecessary to go into the merits of the petitioners' claim for a certificate from the Central Government. The application of the petitioners for a certificate was made not to the Central Government, but to the Central Board of Revenue as it figured then. Sec. 99(1)(iv) of the IT Act, 1961, reads :

(3.) MR . Venkataraman for the petitioners, however, contends that the Central Board of Revenue which was reconstituted as the CBDT under the Central Boards of Revenue Act, 1963, is but an arm of the Government and it would be proper to say that it is the Central Government itself. He relies on the fact that the Board is manned by some of the officials who belong to the Ministry of Finance. We have no hesitation in rejecting this contention. The Central Board of Revenue Act itself makes a distinction between the Central Government and the CBDT. For instance, S. 3 says that the Board shall, subject to the control of the Central Government, exercise its powers and duties entrusted to it by the Central Government or by or under any law. The IT Act itself clearly indicates the framework of the hierarchy of officers with the ITO at the bottom and the Central Board of Revenue and now the CBDT at the top. The Fifth Schedule which we referred to clearly mentions the Central Government as the authority to be satisfied in the matter of issuing a certificate and not any other authority. In such circumstances, we are unable to accept the petitioner's contention that the CBDT should for purposes of the Fifth Schedule be considered as the Central Government.