JUDGMENT

PATHAK, CJI. :— These appeals by special leave are directed against a judgment of the High Court of Punjab and Haryana disposing of an Income-tax Reference in favour of the respondent-assessee.

2. The assessee manufactures straw board. For the assessment years 1965-66, 1966-67 and 1967-68 (the relevant previous years being the respective calendar years 1964, 1965 and 1966), the assessee claimed concessional rates of income-tax, development rebate at higher rate and deduction under S. 80-E of the Income-tax Act, 1961 on the ground that the manufacture of strawboard was a priority industry. For the assessment year 1965-66 the total income assessed was Rs. 17,71,334/- and against the basic rate of 80 per cent the assessee claimed rebate at the rate of 35 per cent up to Rs. 10,00,000/- and on the balance at 26 per cent. The Income-tax Officer allowed the rebate at 30 per cent up to Rs. 10,00,000/- and at 20 per cent on the balance. For the assessment year 1966-67 the assessee claimed development rebate under S. 33 of the Income-tax Act at the rate of 25 per cent on the value of the machinery installed after 1 April, 1965 worth Rs. 34,287/-, but rebate was allowed at 20 per cent only. The assessee also claimed benefit under S. 80-E (inserted by the Finance Act, 1966 with effect from 1 April, 1966) to the extent of the income determined by the Income-tax Officer at Rs. 8,17,485/- received from the manufacture of strawboard. This industry is mentioned at Item No. 16 in the Fifth Schedule to the Income-tax Act as substituted by the Finance Act, 1965. The claim of the assessee was rejected by the Income-tax Officer. For the assessment year 1967-68 the total income of the assessee was determined at Rs. 11,00,885/- The assessee claimed relief under S. 80-E to the extent of Rs. 7,50,316/-received as income from the manufacture of strawboard. This claim was similarly rejected by the Income-tax Officer on the ground that the assessee could not be described as a priority industry. The Income-tax Officer took the view that the manufacture of strawboard was not covered by the words paper and pulp in the relevant Schedules pertaining to the assessment years 1966-67 and 1967-68.

3. The assessee appealed to the Appellate Assistant Commissioner of Income-tax in respect of the three assessments, but the appeals were dismissed. In second appeals filed in all the three cases, the assessees plea that the manufacture of strawboard was a priority industry was accepted and the Appellate Tribunal held that the assessee was entitled to the statutory rebates claimed by it. At the instance of the Revenue, the Tribunal referred the following questions to the High Court for its opinion :

"Assessment year 1965-66

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that strawboard is covered by the term paper and pulp appearing in paragraph F of Part I read with Part III of the First Schedule to the Finance Act, 1965 (Act No. X of 1965)?

Assessment years 1966-67 and 1967-68

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that strawboard is covered by the term paper and pulp appearing at item 16 of the Fifth Schedule to the Income-tax Act, 1961 and in allowing the assessees claim under section 80-E of the Act?"

4. The High Court has held that the strawboard. industry is covered within the expression paper and pulp appearing in the relevant Schedules of the Income-tax Act and has, therefore, answered the questions referred to it in the affirmative, in favour of the assessee and against the Revenue.

5. The sole question before us is whether strawboard can be said to fall within the expression paper and pulp mentioned in the Schedules relevant to the respective assessment years. To resolve the question it is necessary first to examine the significance and scope of the Schedules. The provision for rebate has been made for the purpose of encouragin