1980 (10) TMI 29 - HC - Income Tax

Private Limited Company Denied Tax Relief for Production Activities Under Indian Income Tax Act

The High Court of Bombay ruled that a private limited company was not entitled to relief under section 15C of the Indian Income Tax Act for the assessment ... Exemptions, New Industrial Undertaking Issues involved: Interpretation of relief under section 15C of the Indian Income Tax Act, 1922 for the assessment year 1957-58 based on the commencement of production by the assessee in the year 1951.Summary:The High Court of Bombay heard a reference under section 66(1) of the Indian Income Tax Act, 1922, regarding a private limited company's claim for relief under section 15C for the assessment year 1957-58. The company manufactured springs and accessories, with the relevant previous year being from 1st January, 1956, to 31st December, 1956. The Income Tax Officer (ITO) denied the exemption under section 15C beyond the assessment year 1956-57, stating it was admissible for five successive assessment years from the year of commencement of production. The Appellate Assistant Commissioner (AAC) dismissed the appeal, noting the company had shown finished goods in its balance sheet for 1951. The company argued before the Income-tax Appellate Tribunal that production began only with commercial manufacture, not trial production. The Tribunal disagreed, stating any production, whether trial or commercial, constituted manufacturing under section 15C. The Tribunal's decision was challenged before the High Court, citing a previous case where production was considered to have started only with regular commercial production. However, as the company failed to prove that its 1951 production was solely trial-based, it was held to have commenced production in 1951 and was not entitled to exemption under section 15C beyond the assessment year 1956-57.In conclusion, the High Court answered the referred question in the negative, stating the company was not entitled to relief under section 15C for the assessment year 1957-58. No costs were awarded in this reference.