TMI Blog1998 (4) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ities.On examining the facts and circumstances of the case. Commissioner of Income-tax found that conditions precedent for assuming jurisdiction under section 263 of the Act did exist inasmuch as the item manufactured by the assessee-company was within the ambit of item No. 22 of Schedule XI of the Act. Item 22 of Schedule XI, reads as under: - "Office machines and apparatus such as typewriters, calculating machines, cash registering machines, cheque writing machines, intercom machines and teleprinters." Explanation: The expression "office machines and apparatus" includes all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and for data processing (not being computers within the meaning of section 32AB)." 4. According to the Commissioner of Income-tax, Assessing Officer did not consider this point inadvertantly. He did not examine the merits of the case. He allowed deduction to the assessee under section 80-I of the Act. Section 80-I benefit is available to the assessee if its profits and gains are derived from industrial undertaking which manufactures or produces any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) ELT 23 (SC) wherein it was held that HSN is a safe guide for ascertaining the true meaning of an expression used in the Act unless there a different intention is expressed. It was contended that the items in Schedule XI are lifted verbatim from HSN and, therefore, the same should be referred to explain their content. 7. It was brought to our notice that item No. 22-Office machines and apparatus are listed as including "typewriters" being item 84.69 of section XVI of HSN, "calculating machines" and "cash registering machines" being item 84.70 of section XVI of HSN, "cheque writing machines" being sub-item 18 of main head 84.72 of section XVI of HSN, "intercom machines" and "teleprinters" being classified in item 85.17 of section XVI of HSN. 8. It was submitted that the assessee's item of manufacture, i.e., Xerographic equipment, popularly known as photo-copying machine, figures in a separate section XVIII and a separate item 90.09 which has nothing to do with office machines and apparatus. Therefore, item 22 of XIth Schedule cannot cover assessee's item of manufacture. 9. The explanation to item 22 in Schedule XI further qualifies the expression "office machines and apparat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tariff and ITC (HS) classification of export and import items. On that basis it was argued that assessee's item of manufacture is not covered by item 22 or 10 of Schedule XI. Learned counsel also made a reference to the Industrial Licensing Policy as it applied at the time when the assessee was granted the licence to manufacture xerographic equipment and system. In order to curtail the concentration of economic power Government put severe restrictions on the MRTP and FERA companies from engaging in any item of manufacture or for expanding capacity in the existing item of manufacture without an industrial licence. The MRTP and FERA companies were allowed to secure a licence for manufacture of only items listed in the Appendix to the schedule to Industries Development and Regulation Act. A press note was issued by the Government of India on21st April, 1982. It was stated in para 7 of that press note, that for industrial growth, the CORE sector industries as well as industries with export potential had to adopt advanced technologies. The list of industries open to large industrial houses and FERA companies was, therefore, being revised as per list appended in the press note. Item No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v.UnionofIndia[1988] 1 SCR 383; and (ii) Dunlop India Ltd v.UnionofIndia(45) ELT 197 (SC). 16.2 In the DCM's case it was held that in order to apply the principle of promissory estoppel all that is required to be shown is that the party relied and acted on the representation made to him and the assurance given to him. It was observed that the doctrine of promissory estoppel is well established inIndia. The basis of this doctrine was the interposition of equity which is always true to its form stepped in to mitigate the rigour of strict law. 17. Reference was also made to the decision of the Apex Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323/23 Taxman 14J (SC) wherein it was held that "though equity and taxation are often strangers, attempt should be made that these do not remain always so and a construction that results in equity rather than an injustice should be preferred to the literal construction." 18. Learned counsel placed reliance on the principles of promissory estoppel and contemporaneous exposition. This was without prejudice to the basic submission that items 22 and 10 of Schedule XI do not cover the assessee's item of manufacture, howsoever, the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice machines and apparatus, such as, typewriters, calculating machines, etc., are relatively simple items of manufacture whereas Xerographic equipment are highly complex and sophisticated electronic products. They perform multifarious functions like high-speed duplication, reduction or enlargement of any documents and drawings, transmission of documents and drawings through electronic tele copiers etc. The machines are automatic document handling, sorting and collating devices. The machines have a microprocessor based electronic system for control and diagnostic support. The micro-computer is used to control various functions and the machine is equipped with automatic fault finding and job recovery system. 22. The predominant use of the Xerographic system is by those, who have installed the machines as part of their income earning activity through job work using the machine for servicing the various customers' requirements. The machines do not just copying document. A demonstration of the said machine was made before us. It was shown that machines are capable on their own altering the size, colour effect, placements, etc. On that basis it was argued that such a machine cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction was also allowed which also requires the satisfaction of similar conditions. Therefore, no contrary view can be taken in the matter. On this factual backdrop, assessee took the plea of res judicata. Reliance was placed on the decision of the Apex Court rendered in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248. 25. Next it was argued that the matter regarding claim under section 80-I having been considered in the appeal against order under section 143(3) by the Commissioner of Income-tax (Appeals), jurisdiction under section 263 was barred notwithstanding clause (c) of Explanation to subsection (1) of section 263 of the Act, the assessee claimed that industrial undertakings of manufacturing of (a) Xerographic equipment and (b) toner, developer and photo receptors qualify for the deduction under section 80-I of the Act. Assessing Officer held that deduction under section 80-I can be claimed only on the total profits of the company and not with reference to the unit-wise profits. Before the CIT (Appeals) assessee contended that deduction under section 80-I of the Act should be admissible (a) with reference to the unit-wise profits; and (b) without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C); and (iv) CIT v. First LeasingCo.of India Ltd., [1995] 216 ITR 455/82 Taxman 536 (Mad.). 27. Next it was argued that action under section 263 based on change of opinion is not permitted. It was submitted that Assessing Officer specifically considered the issue. Assessee submitted explanation to the Assessing Officer vide letter dated4th January, 1990. In this letter, it was stated that the product of the assessee is not falling within the ambit of Schedule XI of the Act. It is not open for the Commissioner of Income-tax to substitute its own opinion in place of that of the Assessing Officer where the view of the Assessing Officer is also a possible view. Reference was made to the following: (i) Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129/30 Taxman 528. (ii) Jhulelal Land Development Corpn. v. Dy. CIT [1996] 56 ITD 345 (Bom.); (iii) CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom.), and (iv) Super Cassettes Industries (P.) Ltd. v. CIT [1992] 41 ITD 530 (Delhi). 28. Next it was argued that the deduction under section 80-I cannot be withdrawn in the 6th year of claim. The assessee commenced its commercial production in the assessment year 1987-88 (According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. 32. Reference was also made to the case of Bengal Iron Corpn. v. CTO [1993] 90 STC 47 (SC) wherein it was held that a circular issued by the Board cannot bind judicial or quasi-judicial authorities. It was submitted that a quasi-judicial authority is required to decide the question which may arise before it, in accordance with law, after hearing the parties concerned. It is expected of the quasi-judicial authorities to discharge their functions and duties in their capacity as such in a quasi-judicial manner in no way inhibited by any administrative orders and circulars. 33. It was submitted that there is no estoppel against the statute. The mere fact that the Deputy Controller of Capital Issues considered the issue of equity shares by the company as eligible issue of capital, does not operate estoppel. In the said order there is absolutely no discussion as to the fact that whether the product of the assessee company can be construed to be office machine. It is open for the Tribunal to consider and decide the question afresh independently. 34. Shri Sahu stated that decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to the assessment proceedings for subsequent years. Reference was also made to the following: - (i) Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC); (ii) Raja Bahadur Visheswara Singh v. CIT [1961] 41 ITR 685 (SC); and (iii) New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC). 39. Learned Departmental Representative also placed reliance on the decision of the Tribunal rendered in the case of R.K.K.R. International (P.) Ltd. v. Asstt. CIT in [I.T. Appeal No. 8378 (Delhi) of 1992 dated29-12-1997]. He also relied on the decision of theApex Courtrendered in the case of M.M. Ipoh v. CIT [1968] 67 ITR 106. On the back-drop of these facts, it was argued that the Assessing Officer never applied his mind to the issue that the product of the assessee company falls within the ambit of item 22 of Schedule XI of the Income-tax Act, 1961. 40. Turning to the next limb of argument of Shri Vaish, learned Departmental Representative vehemently argued that the product of the assessee company comes within the ken of item 22 of Schedule XI. It is office equipment. Reference was made to the Budget speech of the Finance Minister (1987). He came heavily on the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic words of the same nature as itself takes its meaning from them and is presumed to be restricted to the same genus as those words. In other words, the general expression is to be read as comprehending only things of the same kind as that designated by the preceding particular expressions, unless there is something to show that a wider sense was intended. According to the learned DR the words "such as" exemplify the nature of office machines and apparatus contained in item 22 of Schedule XI. The job of typewriters and teleprinters is to transcribe the matter. The xeroxing is an advance method of copying the things. The transcribing could be copied to a limited extent on the typewriter. On xerox machine it can be copied to any required number. It was, therefore, argued that the xerox machine falls within the same genus. Applying the rules of Ejusdem Generis and Nociter A Soccis the learned DR submitted that xerox machine comes within the ambit of Schedule XI. 44. The ld. DR invited our attention on the decision of theApex Courtrendered in the case of 'Novopan India Ltd. v. Collector of Central Excise Customs, JT 1994 (6) SC 80. Relying on this decision it was contended that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mirror and that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in the mirror. Following this analogy the learned DR went on to say that xerox machine is nothing but a copier which is used for office purposes. It is, therefore, an office machine and apparatus. 46. The ld. DR also took us through various advertisements appeared in the newspaper. The Modi Xerox desktop copier was projected as a new attraction in office. But in other advertisements it was stated that "every modern office should have these three machines". Down to the picture of machine it was stated the three in one HP office jet pro 1150C. It scans. It prints. It photocopies. It is true to the original vivid column and at Rs. 64,900 it saves you money plus valuable office space. 47. The ld. DR also placed before us the analysis of company results given in the magazine Capital MarketJanuary 25,1998. The Modi Xerox is listed under the caption 'office equipment - photocopier'. Our attention was also invited on some newspapers wherein Modi Xerox was listed under the head 'office machinery'. The ld. DR further submitted that for adjudging the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese points are oriented towards the question that the item manufactured by the assessee falls beyond the ken of Eleventh Schedule of the Act, and conditions precedent for assuming jurisdiction under section 263 did not exist in the facts and circumstances of the present case. 51. Reference was made to the letter of CBDT dated25th January, 1984reproduced hereinbefore at para 5 of the order. On the basis of this letter learned counsel argued that the principles of promissory estoppel can be applied in the facts of the present case. It was argued that the Department cannot be allowed to resile from its promise, because this would work injustice to the assessee. Learned counsel submitted that CBDT's response to the assessee's request should receive due weight. 52. For invoking the principle of promissory estoppel, a firm or specific assurance from the authority concerned is needed. In the letter dated25-1-1984it is only laid down that high technology reproduction and multiplication equipment does not come within the ambit of Schedule XI to the Income-tax Act, 1961. This cannot be construed to be an instruction issued pursuant to the provisions of section 119 of the Act. 53. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C). The reasons are, firstly, that the Income-tax authorities including the Appellate Tribunal are not Courts; and secondly, that the purpose and the subject-matter of the proceedings in a subsequent year are not the same as those in a previous year. 58. There are catena of cases in the same stream wherein it is laid down that as a general rule the principle of res judicata is not applicable to the decisions of Income-tax authorities, an assessment for a particular year is final and conclusive between the parties only in relation to that year. Decisions given in an assessment for an earlier year are not binding either on the assessee or on the Department in a subsequent year. 59. The rule of res judicata is subject to some limitations. There should be finality and certainty in all litigations including litigation arising out of Income-tax Act. An earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, and it had been arrived at after due enquiry, and no fresh facts are placed before the Income-tax authority in the later decision and the Income-tax authority in the earlier decision has taken into consideration all material evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... magazines and papers containing the stock exchange quotations wherein Modi Xerox was listed under office equipment. He also took us through some advertisements wherein xerox machine was projected as an office equipment. Shri Vaish submitted that the machine is not used only for the office purposes, but it can also be used by jobbers and self-employed persons. But the percentage of user by jobbers and self employed was not given. Therefore, it cannot be said that it was predominantly used by the jobbers and self employed. 63. The speech made by the mover of the Bill in explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the Legislation and the object and purpose for which the Legislation was enacted. The Rule of Contemporanea expositio. permits the interpretation of a statute by reference to the exposition it has received from contemporary authorities. It is said that the best exposition of a statute or any other document is that which it has received from contemporary authority. Optima est legum interpres consueludd. Contemporanea expositio est fortissima, in lege where this has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason and spirit' pervading through the statute. The intention of the legislature must be found in the words used by the legislature itself. The CETA generally follow HSN pattern, it is not the same. Often, there are wide variations between HSN and CETA. Functional test can be applied for determining the character of a product. Nomenclature is not decisive in ascertaining the nature of the product. In the case of Atul Glass Industries Ltd. v. CCE 1986 (25) ELT 473 (SC), it was held by the Supreme Court that glass mirrors cannot be classified as "glass and glass-ware" even though glass mirrors have been classified as "glass and glass-ware" in ISI (Indian Standard Institution) classification. In another case it was held that the wind screen for motor vehicle will be "motor vehicle part and not glass and glass ware" as it is known in the market as "motor vehicle part". The word or expression must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. 68. The xerox machines are used mainly for the copying purposes. In one of the advertisements of Modi Xerox the catch lines were: "the new attract ion in your office". Thereafter the functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to tax some more money to the exchequer. The section is not meant to keep vigil on escapement of revenue. This aspect is taken care of by the other provisions of the Act. The prejudice i.e., contemplated under section 263 is prejudice to the Income-tax administration as a whole. Section 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate order in exercise of the supervisory power. It is to be invoked and employed only for the purpose of setting right distortions and prejudices to the revenue. It is beyond dispute that under section 263, CIT does have the power to set aside the assessment order and send the matter for a de novo investigation if he is satisfied that further enquiries needed and the order of Assessing Officer is prejudicial to the interests of the revenue. For assuming jurisdiction under section 263, it is sine qua non, that the impugned order must be erroneous and prejudicial to the interest of revenue. Both the conditions must be satisfied. 71. There was, upto31-3-1988, conflicting judicial opinion whether, after an assessment has been subjected to the first appellate order the point which was neither raised in appeal nor de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the limit prescribed by the Supreme Court in its decision in the case of Rai Bahadur Hardutroy Motilal Chamaria. 74. It was further argued that where an authority had power or discretion to do something for which appropriate circumstances did exist, whether or not that authority has, in fact, exercised that power, such an authority should be deemed to have exercised that power. Consequently, the issues emanating out of the assessment order which were decided by the Income-tax Officer in assessee's favour over which the CIT (Appeals) had power to examine and pass appropriate orders, but did not actually do so, the CIT (Appeals) should be deemed to have been examined those issues and agreed with the Assessing Officer and, thus, that portion merged with the order of the CIT (Appeals). Therefore, apropos the issues disputed in appeal, the CIT (Appeals) should be deemed to have considered and decided all aspects of the matter. 75. The matter which CIT brought, was concerning the eligibility. The aspect apropos the eligibility was not disputed before the Commissioner of Income-tax (Appeals). CIT (Appeals) proceeded on the basis of the presumption that conditions concerning th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd CIT cannot assume jurisdiction under section 263 on the basis of change of opinion only because he had some other opinion in the matter. Similar view was taken in the case of Gabriel India Ltd.(Bom.) In this case it was held that Commissioner of Income-tax cannot revise order under section 263 merely because he disagree with the conclusion arrived at by the-Assessing Officer. 79. For assuming jurisdiction under section 263 it is a sine qua non that the twin conditions must be satisfied i.e.,(i) order must be erroneous; and (ii) prejudicial to the interest of the revenue. Commissioner of Income-tax must have some cogent material before him to declare the order of Assessing Officer erroneous. The order of the Assessing Officer cannot be held to be erroneous merely on the whims and fancies of the Commissioner. In the instant case, no factual or legal error was pointed out by the Commissioner of Income-tax. Assessing Officer appreciated the complete facts. All the relevant enquiries were made. Clarification by the CBDT in the matter was available. Assessee got the approval under section 80-CC where the similar conditions need to be satisfied. Assessee also got the deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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