COMMISSIONER OF INCOME TAX Vs. KRISHNA PULVERISING MILLS

JUDGEMENT

(1.) THE Tribunal referred the following four questions for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 :

(2.) THE facts in brief are as follows : THE assessee was having three units and there was one profit and loss account and one balance-sheet. THE Income-tax Officer felt that for the purpose of claiming deduction under Sections 80HH and 80-I of the Income-tax Act there should be a separate profit and loss account and balance-sheets in respect of each unit. THErefore, he disallowed the deduction under Sections 80HH and 80-I claimed by the assessee. THE Income-tax Officer also felt that the assessee is not manufacturing or producing any article in any of its three units including the main unit as it was only crushing barytes into powder for hire and receiving the crushing charges. THErefore, it will not amount to manufacturing activity, nor can the powder be called a new article. On appeal, the Commissioner of Income-tax held that the assessee was not manufacturing any new article by powdering the barytes. On further appeal, the Tribunal held that the activity of converting the barytes into powder can be held to be a manufacturing activity, and it can be said that there is production of barytes powder out of barytes. This powder has got marketability as it is used in the manufacture of paint or in extracting crude oil in the oil refining industry. THE Tribunal also held that if the units set up in backward area qualify for deduction in respect of the other conditions prescribed in Section 80HH or Section 80-I, the difficulty of apportioning the profits and gains from such undertakings should not be viewed as a disqualification. In other words, the Tribunal held that irrespective of the fact that there is no division of accounts still they are entitled for the benefit of Sections 80HH and 80-I as having satisfied the conditions laid down under the said two sections.

(3.) THE proviso to Sub-section (6) of Section 80HH itself provides that in the opinion of the Assessing Officer, the computation of the profits and gains of the industrial undertaking presents exceptional difficulties, the officer may compute such profits and gains on such reasonable basis as he may deem fit. In other words, it empowers the Assessing Officer to ascertain the profits and gains of a particular unit and make assessment. THErefore, there is no substance in the contention of learned counsel for the Revenue, and the assessee is entitled for the benefit of Sections 80HH and 80-I provided the criteria laid down is satisfied.