Corporate veil and defence contract classification require a proper factual foundation before tax relief can be granted.

A corporate veil may be lifted only on a proper factual foundation, and relief based on treating defence-related transactions as non-sales or non-works contracts cannot stand where the relevant facts were not established before the assessing authorities. The Court noted that the assessee's separate corporate identity, third-party transactions, contract structure, supply arrangement, valuation mechanism, and tax incidence all required factual examination. Because the Tribunal granted relief without adequate analysis and the record was insufficient for final determination in revision, the dispute had to be remitted for fresh adjudication and reconsideration after the assessee was allowed to produce relevant documents.

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Issues: Whether the Tribunal was justified in granting relief on the footing that the transactions with the Defence Department and Indian Air Force were not sales or works contracts, and whether the matter required remand to the assessing officer for fresh consideration.

Analysis: The assessee was a corporate body incorporated under the Companies Act and, on the material placed before the lower authorities, was treated as a separate legal entity. The Court noted that the plea to disregard the corporate form and treat the assessee as part of the Defence Department depended upon factual foundations that had not been laid before the assessing authority or the first appellate authority. The record also showed that the assessee had transactions with third parties and that the nature of the defence contracts, the supply arrangement, the valuation mechanism, and the incidence of tax required examination on facts. The Tribunal had allowed relief without properly analysing these factual aspects, and the rectification order also did not identify any apparent mistake with clarity. In these circumstances, the dispute could not be finally decided in revision on the existing record.

Conclusion: The Tribunal's relief could not be sustained on the material then available, and the matter had to be sent back to the assessing officer for reconsideration after giving the assessee an opportunity to produce relevant documents.

Final Conclusion: The revision petitions succeeded to the extent that the impugned order was set aside and the assessment dispute was remitted for fresh adjudication in accordance with law.

Ratio Decidendi: A corporate veil may be lifted only on a proper factual foundation, and where the relevant facts bearing on the true nature of the transactions have not been established before the assessing authority, the dispute should be remitted for fresh factual determination rather than decided conclusively in revision.

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