1996 (8) TMI 137 - AT - Income Tax

Ship breaking company not eligible for tax deductions under IT Act, Tribunal rules in line with Assessing Officer.

Virendra & Co. Versus Assistant Commissioner Of Income-Tax.

The Tribunal concluded that the assessee-company, engaged in ship breaking, does not qualify as an industrial undertaking engaged in manufacturing ... Assessment Year, High Court, Mistake Apparent From Record, Supreme Court Issues Involved:1. Whether the assessee-company engaged in ship breaking qualifies as an industrial undertaking engaged in manufacturing activities.2. Whether the CIT(A) erred in directing the ITO to allow the assessee deduction under section 80HHA and section 80-I of the I.T. Act.3. Alleged mistakes in the Tribunal's order and the validity of the affidavit filed by the assessee's counsel.4. The Tribunal's consideration of the Supreme Court decision in CIT v. N.C. Budharaja & Co. and its impact on the case.5. Allegations regarding the Tribunal's failure to consider various decisions cited by the assessee.6. The Tribunal's reliance on its own understanding of law and the implications of not confronting the assessee with certain decisions before mentioning them in the order.7. The issue of the Tribunal's decision being contrary to its earlier decision involving the same judicial member.Detailed Analysis:1. Industrial Undertaking and Manufacturing Activities:The primary issue was whether the assessee-company, engaged in ship breaking, qualified as an industrial undertaking engaged in manufacturing activities. The Tribunal concluded that the breaking or dismantling of ships is not equivalent to manufacturing or production of an article or thing. This conclusion was based on detailed reasoning and interpretations of the terms 'manufacture' and 'production' as given by the Supreme Court and reproduced by the Bombay High Court.2. CIT(A)'s Direction for Deductions:The Tribunal reversed the CIT(A)'s direction to allow the assessee deductions under section 80HHA and section 80-I of the I.T. Act. The Tribunal agreed with the Assessing Officer's view that the activities of the assessee did not qualify for these deductions, aligning with the Supreme Court's decision in CIT v. N.C. Budharaja & Co.3. Alleged Mistakes in Tribunal's Order and Affidavit Validity:The assessee alleged mistakes in the Tribunal's order, particularly that the Departmental Representative had conceded to the assessee's submissions. However, the Tribunal found these allegations and the supporting affidavit by the assessee's counsel to be incorrect. The Tribunal noted that the Departmental Representative had no authority to make such concessions without authorization from the CIT.4. Consideration of Supreme Court Decision in CIT v. N.C. Budharaja & Co.:The Tribunal emphasized the significant impact of the Supreme Court's decision in CIT v. N.C. Budharaja & Co., which altered the interpretation of terms like 'industrial undertaking,' 'manufacture,' and 'production.' This decision reversed several High Court rulings, including those of the Bombay High Court, which had previously been favorable to the assessee's position.5. Allegations Regarding Consideration of Decisions Cited by Assessee:The Tribunal addressed the assessee's claim that it had not considered several decisions cited in the paper book. The Tribunal clarified that it had indeed considered all arguments, orders, and material on record, including citations from various Tribunal and High Court decisions. The Tribunal found it unnecessary to reproduce every cited case, as the Supreme Court's decision in N.C. Budharaja & Co. provided sufficient grounds for its conclusion.6. Tribunal's Reliance on Its Own Understanding of Law:The Tribunal rejected the argument that it should have sought approval from the parties for its understanding of the law before passing its order. The Tribunal asserted its duty to base its decisions on material on record, arguments presented, and its own legal knowledge. It emphasized that the Tribunal is not obligated to allow endless citations and counter-citations, nor to provide opportunities to differentiate every cited case.7. Tribunal's Decision Contrary to Earlier Decision:The assessee argued that the Tribunal's decision was contrary to an earlier decision involving the same judicial member. The Tribunal acknowledged the general principle that a Bench should not differ from another Bench of equal strength. However, it noted exceptions, such as subsequent Supreme Court or jurisdictional High Court decisions, which necessitate a different conclusion. The Tribunal found that the Supreme Court's decision in N.C. Budharaja & Co. justified its differing decision.Conclusion:The Tribunal dismissed the miscellaneous application moved by the assessee, finding no substance in the allegations of mistakes and affirming its decision based on the Supreme Court's interpretation of relevant legal terms and principles.