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Issues involved: Interpretation of relief under section 80-I of the Income Tax Act, 1961 for a company manufacturing iron bars and rods from ingots and billets, denial of relief on turnover from billets purchased from outside parties, past history influencing current assessment decisions.
Judgment Details: The High Court of Allahabad addressed the case of a company manufacturing iron bars and rods from ingots and billets, claiming relief under section 80-I of the Income Tax Act, 1961. The Income Tax Officer (ITO) allowed relief only on the turnover of iron bars and rods from ingots manufactured by the company itself, not on those from billets purchased. The company challenged this decision through a revision application under section 264 before the CIT, Kanpur-I, who upheld the ITO's view based on past assessment history. The court considered the classification based on different manufacturing processes for ingots and billets, with the company being a priority industry engaged in iron and steel production. The court emphasized that the source of raw material is irrelevant for claiming relief under section 80-I, as long as the final products fall under the specified category. The court concluded that there was no rational basis for denying the company the benefit of section 80-I for turnover from iron bars and rods manufactured from billets purchased externally, quashing the ITO and CIT orders to that extent. In a separate judgment, Justice Satish Chandra elaborated on the distinction between manufacturing and processing, emphasizing that the processing of billets into iron rods and bars constitutes "production" under the Act. He agreed with the primary judgment's findings and ordered in favor of the company. The court allowed the writ petition with costs, quashing the ITO and CIT orders to the extent specified, ensuring the company's entitlement to relief under section 80-I for turnover from iron bars and rods produced from externally purchased billets.
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