Court directs Tax Tribunal to clarify Section 80-I claim for shoe manufacturer

The Court allowed the petitions, directing the Income Tax Appellate Tribunal to frame a statement of the case and refer the question of law under Section 256(2) of the Income-tax Act, 1961 regarding the claim under Section 80-I for an assessee engaged in the business of manufacture and sale of shoes. The Court emphasized the need for clarification on the classification of the assessee as an industrial undertaking due to conflicting views among different High Courts, leading to the decision in favor of the assessee for further resolution.

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Issues:
Prayer for direction to ITAT to frame statement of the case and refer question of law under Section 256(2) of the Income-tax Act, 1961 regarding the claim under Section 80-I for an assessee engaged in the business of manufacture and sale of shoes.

Analysis:
The judgment pertains to two I.T.C. Nos. 33 and 34 of 1999 where the assessee, a registered partnership firm, sought direction to the Income Tax Appellate Tribunal (ITAT) to frame a statement of the case and refer a question of law arising from orders dated 18.2.1998. The question raised was whether the Tribunal erred in law by not accepting the claim under Section 80-I despite the assessee fulfilling all conditions of being an industrial undertaking. The Assistant Commissioner of Income-tax had disallowed the claim under Section 80-I on the grounds that the assessee did not meet the necessary conditions. The Tribunal's findings highlighted that the shoes were manufactured by cobblers on a piece-rate basis, not employees of the assessee, leading to a dispute over the classification of the assessee as an industrial undertaking.

The learned senior counsel argued that conflicting views existed among different High Courts regarding the definition of an industrial undertaking under Section 80-I, citing judgments from Madras High Court and other High Courts favoring the assessee's position. The absence of a Supreme Court or jurisdictional High Court judgment on the matter further complicated the issue. The revenue's counsel acknowledged the conflicting opinions but emphasized that the contrary views emerged after the Tribunal's decision on the application under Section 256(1) of the Act.

The Court carefully considered the arguments presented and concluded that the question raised by the assessee warranted determination, especially in the absence of a definitive stance from the Supreme Court or the jurisdictional High Court on the issue. Consequently, the Court allowed the petitions, directing the Tribunal to prepare a statement of the case and refer the question of law to the Court for resolution.

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