1981 (9) TMI 145 - AT - Income Tax

Tribunal grants tax relief to company for processing goods under Income Tax Act

The Tribunal allowed the appeals, determining that the company's activities qualified as processing of goods, making it eligible for tax relief as an ... - Issues:1. Whether the company's activities qualify as an industrial undertaking for tax relief under section 80J.2. Whether the Commissioner had the authority to revise the Income Tax Officer's orders under sections 143(3), 144B, and 154 of the Income Tax Act.3. Whether the company should be considered an industrial company under section 104(4)(a) of the Income Tax Act.Analysis:Issue 1:The case involved a dispute regarding the classification of the company's activities as an industrial undertaking for tax relief under section 80J. Initially, the Income Tax Officer (ITO) disallowed the claim, considering the company's activities as mere processing of goods. However, upon a subsequent application under section 154 of the Act, the ITO recognized the company as an industrial undertaking engaged in processing goods. The Commissioner issued a notice under section 263, challenging the ITO's orders and contending that the company was not involved in processing operations beyond cutting and packing tobacco leaves. Ultimately, the Commissioner canceled the ITO's order and directed tax to be charged at a higher rate of 65%.Issue 2:The appellant raised objections against the Commissioner's exercise of power under section 263 to revise the ITO's orders under sections 143(3) and 154, as well as the order issued in compliance with the IAC's direction under section 144B. The Tribunal analyzed the scope of the IAC's direction and the applicability of section 104(4)(a) of the Income Tax Act. It concluded that the ITO's order under section 154 was distinct from the IAC's direction and, therefore, subject to revision by the Commissioner under section 263. The Tribunal dismissed the appellant's objections on this ground.Issue 3:The Tribunal delved into the nature of the company's activities to determine whether it qualified as an industrial company under section 104(4)(a) of the Act. Various legal precedents were cited, including cases discussing the definitions of manufacturing and processing activities. The Tribunal emphasized that physical changes in goods, even without resulting in new articles, could constitute processing. Applying this interpretation, the Tribunal set aside the Commissioner's order, ruling in favor of the company's entitlement to relief under section 104(4)(a) of the Income Tax Act.In conclusion, the Tribunal allowed the appeals, holding that the company's activities amounted to processing of goods, entitling it to the tax relief as an industrial company under the relevant provisions of the Income Tax Act.