Commencement of manufacture under s.84(7) runs from cellulose pulp production year, not later CMC manufacture stage

SC allowed the revenue's appeal, set aside the HC's judgment, and restored the Tribunal's view that the assessee's new industrial undertaking commenced manufacture when it began producing cellulose pulp in March 1961. SC held that the HC, acting in a purely advisory capacity under the reference jurisdiction, could not interfere with the Tribunal's factual finding absent perversity or lack of evidence. The industrial licence for manufacture of CMC was construed to include manufacture of cellulose pulp as an intermediate, marketable product, consistent with the company's objects clause. Accordingly, for purposes of s.84(7) of the Income-tax Act, the five-year relief period commenced from the assessment year relevant to that production year.

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Issues:
Interpretation of section 84 of the Income-tax Act, 1961 regarding eligibility for relief, classification of products as "articles," commencement of manufacturing for tax relief purposes, and the role of the High Court in advisory jurisdiction.

Analysis:
The case involved an appeal based on a certificate granted by the High Court of Gujarat under section 261 of the Income-tax Act, 1961. The respondent, a public limited company, was engaged in manufacturing chemical products, specifically sodium-carboxy-methyl-cellulose (CMC). The dispute arose regarding the eligibility of the respondent for relief under section 84 of the Act for the assessment year 1966-67. The Income-tax Officer and the Appellate Assistant Commissioner held that the relief was not applicable beyond the specified period. The Tribunal affirmed this decision, stating that the production of cellulose pulp by the respondent in 1961 constituted a finished product, making it ineligible for relief in 1966-67.

The matter was referred to the High Court of Gujarat, which ruled in favor of the respondent, emphasizing that the term "articles" in section 84 referred to the end product of the entire industrial undertaking. The High Court held that the production of cellulose pulp did not constitute the production of "articles" for tax relief purposes in the assessment year 1961-62. However, the Supreme Court disagreed with the High Court's interpretation, stating that the High Court's advisory role did not extend to revising factual findings of the Tribunal unless they were unsupported, perverse, or unreasonable.

The Supreme Court highlighted that cellulose pulp, although a raw material for CMC, was also a marketable commodity by itself. The Court emphasized that the nature of the industrial license and the wide scope of the respondent's memorandum of association supported the production of cellulose pulp as a legitimate manufacturing activity. The Court rejected the argument that relief under section 84 should only apply when CMC was manufactured, emphasizing that the statute's language was clear regarding the commencement of manufacturing or production of "articles."

The Supreme Court dismissed the alternative submission made by the respondent's counsel, stating that it was not raised before the Tribunal and could not be considered on appeal. The Court emphasized that a liberal interpretation of tax statutes was only warranted in cases of genuine ambiguity, which was not applicable in this instance. The Court concluded that the appeal succeeded, setting aside the High Court's judgment and allowing costs in favor of the appellant.

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