Back
PUNJAB & HARYANA HIGH COURT
Ashok Bhan and N.K.Agrawal JJ.
B.S.Bajaj And Sons
Versus
Commissioner Of Income-tax
Income tax Reference No. 104 of 1982,
Decided On : AUGUST 5, 1996
INCOME TAX - Deductions - Industrial undertakings - Forest lessees - Whether entitled to deductions under Sections 80J and 80HH of the Income-tax Act, 1961 - Held, yes - Circular issued by the Central Board of Direct Taxes clarifying that forest lessees would be entitled to the benefits available under Sections 80J and 80HH of the Act is clarificatory in nature and does not override the provisions of the Act - It is a benevolent circular issued in favour of the assessee providing administrative relief and says that if the process involved is not merely conversion of standing trees into firewood but also manufacture of new saleable commodities, the benefit of deduction under Sections 80J and 80HH would be available - The assessee is entitled to take benefit of the same.
Fact of the Case:
The assessee, a forest lessee, claimed deductions under Sections 80J and 80HH of the Income-tax Act, 1961 (the Act) in respect of its business. The Income-tax Officer allowed the claim, but the Commissioner of Income-tax revised the assessment and disallowed the deductions. The Tribunal upheld the Commissioner's order. The assessee filed a petition under Section 256(1) of the Act, and the High Court referred the following questions of law to the Supreme Court for its opinion: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order of the Income-tax Officer did not merge with the order of the Appellate Assistant Commissioner and the Commissioner had the jurisdiction to interfere with the order of the Income-tax Officer under Section 263 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the assessee was not entitled to relief under Sections 80J and 80HH of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the benefit of the Boards circular and the letter of the Minister of State for Finance could not be extended to the assessee?
Finding of the Court:
1. The order of the Income-tax Officer did not merge with the order of the Appellate Assistant Commissioner, and the Commissioner had the jurisdiction to interfere with the order of the Income-tax Officer under Section 263 of the Act. 2. The assessee was entitled to relief under Sections 80J and 80HH of the Act. 3. The benefit of the Board's circular and the letter of the Minister of State for Finance could be extended to the assessee.
Issues: 1. Whether the Commissioner had the jurisdiction to interfere with the order of the Income-tax Officer under Section 263 of the Act? 2. Whether the assessee was entitled to relief under Sections 80J and 80HH of the Act? 3. Whether the benefit of the Board's circular and the letter of the Minister of State for Finance could be extended to the assessee?
Ratio Decidendi: 1. The order of the Income-tax Officer did not merge with the order of the Appellate Assistant Commissioner, and the Commissioner had the jurisdiction to interfere with the order of the Income-tax Officer under Section 263 of the Act, as held by the Full Bench of the High Court in Punjab State Civil Supplies Corporation Ltd. v. CIT [1993] 200 ITR 536. 2. The assessee was entitled to relief under Sections 80J and 80HH of the Act because: (a) The assessee was producing articles, even if it was not manufacturing as such, as observed by the Supreme Court in N.C Budharajas case [1993] 204 ITR 412. (b) Circular No. 329 (see [1982] 135 ITR (St.) 7), dated February 22, 1982, issued by the Central Board of Direct Taxes, clarifies that forest lessees would be entitled to the benefits available under Sections 80J and 80HH of the Act, and this circular is clarificatory in nature and does not override the provisions of the Act. 3. The benefit of the Board's circular and the letter of the Minister of State for Finance could be extended to the assessee because the circular is clarificatory in nature and extends benefit to the assessee in consonance with the provisions of the Act and does not run counter to the same.
Final Decision: Question No. 1 is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Question No. 2 is answered in the negative, i.e., in favour of the assessee and against the Revenue. Question No. 3 is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.
Ashok Bhan, J.
1. This judgment shall dispose of Income-tax Reference No. 104 (B.S. Bajaj and Sons v. CIT) ; Income-tax Reference No. 89 (Raj Manohar and Brothers v. CIT) ; Income-tax Reference No. 70 (Raj Manohar and Brothers v. CIT) ; Income-tax Reference No. 117 (Anoop and Co. v. CIT) ; Income-tax Reference No. 123 (Gulam Din Vidya v. CIT) and Income-tax Reference No. 127 (Oriental Timber Traders v. CIT), Income-tax Reference No. 11 of 1982, as in all these cases common questions of law are involved, based on the same or similar set of facts. The assessees in all these reference petitions are forest lessees.
2. The facts are taken from Income-tax Reference No. 104 of 1982.
3. At the instance of the assessee, the following questions of law have been referred to this court for its opinion :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order of the Income-tax Officer did not merge with the order of the Appellate Assistant Commissioner and the Commissioner had the jurisdiction to interfere with the order of the Income-tax Officer under Section 263 of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the assessee was not entitled to relief under Sections 80J and 80HH of the Income-tax Act, 1961 ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the benefit of the Boards circular and the letter of the Minister of State for Finance could not be extended to the assessee?"
4. The same questions of law have been referred in Income-tax Reference No. 70 of 1982. The two questions referred in Income-tax References Nos. 117, 123 and 127 of 1982, are equal to questions Nos. 2 and 3 referred in Income-tax Reference No. 104 of 1982. The question referred in Income-tax Reference No. 89 of 1982 is similar to question No. 2 in Income-tax Reference No. 104 of 1982. The opinion given on questions Nos. 2 and 3 in Income-tax Reference No. 104 of 1982 shall be the opinion on questions Nos. 1 and 2 in Income-tax References Nos. 117, 123 and 127 of 1982. Similarly, the opinion given on question No. 2 in Income-tax Reference No. 104 of 1982 would be the same as to the question referred in Income-tax Reference No. 89 of 1982.
5. The relevant facts giving rise to these questions are as under :
The assessee is a firm deriving income from extracting timber from the forests taken on lease from the Government. The assessee had claimed deductions under Sections 80J and 80HH of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), in respect of its business. The Income-tax Officer allowed the claim of the assessee. Later on, the Commissioner of Income-tax initiated proceedings under Section 263 of the Act for revising the assessment framed by the Income-tax Officer. The revisional authority was of the view that the assessee was not deriving income from any industrial undertaking which could be eligible for deductions under Sections 80J and 80HH of the Act. Relying upon the two decisions of this court in Sidhu Ram Atam Parkash v. State of Haryana [1974] 34 STG 344 and Pyare Lal Khushwant Rai v. State of Punjab [1974] 34 STC 341, it was held that the contractor was making logs and converting them into rafters, planks and firewood, either by manual labour or mechanical process and did not bring into existence any new substance and, therefore, could not be said to be manufacturing or producing anything new, saleable as such. It also recorded a finding that the assessee was giving further contracts to various parties and the workers required for carrying out the operations were engaged by the sub-contractors and were not employed by the assessee. It was held that the assessee had only appointed the supervisory staff and the workers who carried out the operations of cutting the trees were employed by the sub-contractors. The supervisory staff could not be said to be the workers employed in a
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
