1996 (2) TMI 131 - SC - Income Tax

Whether on the facts and in the circumstances of the case the assessee was entitled to claim deduction from tax in respect of de-oiled cakes exported or sold to exporters by it under section 2(5)(c) of the Finance Act 1966? Held that - Now clause (c) adheres to the said pattern. Where it seeks to refer to the entire item in the First Schedule it does so and where it seeks to refer only to a particular sub-item of an item in the First Schedule it says so--and the description is identical. To wit item No. 1 in clause (c) is fuels the same as the heading of item No. 2 of the First Schedule. Item No. 2 in clause (c) is fertilisers the same as in item No. 18 of the First Schedule. Similarly item No. 3 in clause (c) is photographic raw film and paper the same as item No. 20 in the First Schedule. Item No. 4 in clause (c) however refers only to sub-item (2) of item No. 23 in the First Schedule but not to other sub-items. Item No. 4 in clause (c) reads Textiles (including those dyed printed or otherwise processed) made wholly or in part of jute including jute twine and rope. Similarly item No. 5 in clause (c) refers to sub-item No. (2) of item No. 24 of the First Schedule and item No. 6 in clause (c) refers to sub-item (5) of item No. 24. In all cases however the description of articles is identical. To repeat both clauses (ii) and (iii) of clause (a) and clause (c) refer to articles only as does the First Schedule to the I. D. R. Act. If so all of them must carry the same meaning and purport. Moreover clause (c) being an exception to sub-clauses (ii) and (iii) must follow the same pattern as in the said sub-clauses it is reasonable to presume so. Appeal dismissed.

Summary

Issues:
Interpretation of provisions under the Finance Acts of 1966 and 1967 regarding additional deductions for export of industrial goods.

Analysis:
The case involved an appeal by the assessee against a judgment of the Gujarat High Court, which ruled in favor of the Revenue regarding the entitlement to claim deductions for de-oiled cakes exported or sold to exporters under the Finance Acts of 1966 and 1967. The key questions revolved around the interpretation of specific clauses in the Acts related to additional deductions for exports. The relevant provisions allowed deductions for manufacturers exporting specified articles out of India or selling them to exporters. The dispute arose when the Income-tax Officer rejected the assessee's claim based on clause (c) of the Finance Acts, which listed certain articles ineligible for deductions. The Appellate Assistant Commissioner and the Tribunal supported the assessee's position, leading to the matter being referred to the High Court.

The central issue in the appeals was whether clause (c) of the Finance Acts referred to the articles listed therein or to the industries manufacturing those articles. The Supreme Court analyzed the scheme of the provisions and concluded that clause (c) was an exception to the deductions provided in sub-clauses (ii) and (iii) of the Acts. The Court emphasized that both the Acts and the First Schedule to the Industries (Development and Regulation) Act, 1951, listed articles under various categories. By comparing the pattern of descriptions in the Acts and the First Schedule, the Court highlighted that clause (c) mirrored the structure of the Schedule, referring to articles specifically. The Court illustrated this by examining how clause (c) aligned with the items and sub-items in the First Schedule, demonstrating a consistent approach where clause (c) referred to articles and sub-items akin to the Schedule.

Ultimately, the Supreme Court concurred with the High Court's interpretation, affirming that clause (c) of the Finance Acts pertained to the articles mentioned and not the industries producing them. The Court's decision rested on the consistent pattern observed in the provisions and the logical inference that an exception clause like (c) should follow the same approach as the main deduction clauses. Consequently, the appeals by the assessee were dismissed, with no costs awarded.