CIT Vs. BHATIA IMPEX

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal, Delhi, at the instance of the department has referred the following question of law under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court : 'Whether, on the facts and in the circumstances of the case, the assessee's case fell under the definition of 'Small Scale Industrial Unit' as mentioned in the Explanation to section 35B(IA) of the Income Tax Act, 1961?'

(2.) THE assessment year involved is 1979 -80. The assessee, a registered firm, deals in business of export of brassware and it claimed weighted deduction under section 35B(IA) amounting to Rs. 1,30,349. It claimed to be a Small Stale Exporter within the meaning of section 35B(I A) as inserted by the Finance Act, 1978 with effect from 1 -4 -1978. The claim was denied by the Income Tax Officer on the ground that the assessee did not have manufacturing licence or power connection or plant and machinery. In the balance sheet the fixed assets had been shown at Rs. 53,995 only. It was found by the Income Tax Officer that the assessee was getting finished goods from artisans and was only having them polished, engraved and finished by others on payment of wages and that the assessee was not carrying on any manufacturing activities as its main business was to get the exportable items ready through. the agency of others and then to export them. The Tribunal found that the assessee purchased raw material in moulded forms described as 'Kora Mal', i.e., prepared matter in a raw and unfinished condition but not the final product. The 'Kora Mal' was soldered in the assessee's factory and engraved and polished there. The assessee paid the wages which is borne out from the fact that the assessee maintained the establishment where soldering, polishing, plating, engraving and packing were done with the help of workers or labourers and to whom the wages were paid. On these facts, the Tribunal held that the assessee was entitled to be treated as a 'Small Scale Exporter' and to be entitled to the weighted deduction under section 35B of the Act.

(3.) THE Tribunal has not set aside the findings recorded by the authorities below that the assessee do not own any plant or machinery. It granted the relief on the basis of its order passed in the case of Talwar and Khullar (P.) Ltd. (IT Appeal Nos. 2400 and 2401 (Delhi) of 1981, dated 9 -11 -1982). A copy of the said judgment has been filed as Annexure D. A perusal of the said order of the Tribunal shows that in that case, the Tribunal was considering the deduction under sections 80J and 80HH of the Act with reference to an 'Industrial Company'. The said order of the Tribunal is not applicable so far as the interpretation of 'Small Scale Exporter' is concerned.