COMMISSIONER OF INCOME TAX Vs. GODAVARI PLYWOODS LIMITED

JUDGEMENT

(1.) In a batch of cases, references were made to this court by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961 ("the Act" for short). All the cases involve a common question of law; there are other questions also in a few cases. Before setting out the main question referred for the consideration of this court, it will be expedient to refer to the facts giving rise to this question.

(2.) As part of the measures to ensure balanced regional development, the Government of India had announced certain financial incentives for industries established in selected backward districts/areas. These are in addition to the facilities and incentives offered by the individual State Governments. The incentive scheme for the country as a whole, as announced by the Government of India in the year 1971, is "CENTRAL OUTRIGHT GRANT OR SUBSIDY SCHEME, 1971". The backward areas under the scheme were clearly specified. In order to become eligible to the Central subsidy, the industrial units should have been set up in the backward areas after the dates specified in the scheme. The industrial units are also eligible for Central subsidy where effective steps were taken to set them up after the specified dates. The scheme specifies the nature of "effective steps" to be taken for this purpose. All industrial units including servicing units, having fixed capital investment in land, buildings and machinery, whether in the public or private sectors, are eligible for the subsidy. Existing units can also claim subsidy for effecting substantial expansion after the crucial dates mentioned in the scheme in so far as the expanded portion is concerned. The quantum of subsidy is also specified in the scheme. For claims relating to the period ending 28/02/1973, the subsidy is 10% of the fixed capital investment or Rs. 5 lakhs, whichever is lower. For claims relating to the period commencing from 1/03/1973, the subsidy is 15% of the fixed capital investment or Rs. 15 lakhs, whichever is lower. The procedure for claiming the subsidy is specified in the scheme. It is not necessary to refer to the same except to state that the subsidy has to be claimed from the State Governments which scrutinise the claims through State level Committees. The claims for subsidy should be submitted to the Director of Industries of the State concerned.

(3.) As already pointed out above, the financial incentives offered by the Government of India are in addition to the facilities and incentives offered by the individual State Governments. The State of Andhra Pradesh had also offered certain facilities and incentives to industries established in backward areas. Certain incentives were offered by the State Government in G. O. Ms. No 1225, Industries Department, dated 31/12/1968. and also in G. O. Ms. No. 455, Industries and Commerce Department, through schemes formulated by the aforesaid Government orders were in vogue till February, 1976. Taking into consideration the developments subsequent to the issue of the above referred G.Os., and reviewing the industrial needs, the Government revised the scheme of incentives so as to more effectively serve the purpose of bringing about rapid industrial growth in the State and, along with it, to serve the purpose of bringing about this growth in all parts of the State, with particular attention to the backward taluks and blocks and of stimulating new entrepreneurial development. The State Government felt that principles of selectiveness and gradation should be introduced. Based on these considerations, the Government approved the State Incentive Scheme through G. O. Ms. No. 224, Industries and Commerce Department, dated 9/03/1976. The incentives scheme formulated through the aforementioned G. O. Ms. No. 224, dated 9/03/1976, superseded the incentive scheme covered by the earlier two G.Os. dated 31/12/1968, and 3/05/1971.