TMI Blog1983 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 3 of the Scheme provides that any company which claims that it is eligible for the grant of the certificate in respect of any relevant year may apply to the ITO, and paragraph 5 provides that the ITO, after making such enquiry as he deems fit, can determine the eligibility of the applicant for the certificate and the amount thereof. Where the ITO rejects the application, an appeal is provided to the Commissioner of Income-tax under paragraph 5 of the Scheme. As required under paragraph 3 of the Scheme, the petitioner filed two applications for the assessment years 1967-68 and 1970-71 for grant of Tax Credit Certificate under s. 280 ZB of the Act. Section 280 ZB of the Act reads as under (1) Where any company engaged in the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO held that Item 1A(2) of the First Schedule covers " ferro alloy " and would not include " ferro manganese " which is manufactured by the petitioner. The ITO further held that the total income assessed of the petitioner for the relevant years includes the amount received by the assessee from the Government on account of import entitlement and which has been credited to the profit and loss account. The ITO felt that this income is not specifically attributable to manufacture or production of ferro manganese, even assuming that the production of that item is covered by the. First Schedule to the Industries (Development and Regulation) Act, 1951. The petitioner carried an appeal before the Commissioner of Income-tax, Bombay City-IV, Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensated by issue of import entitlements, the sale thereof must be considered as attributable to the manufacture or production of " ferro manganese ". Shri Joshi, learned counsel appearing on behalf of the Department, on the other hand, submitted that the expression " attributable " must be considered to mean the profits which have arisen directly out of the manufacture of a specific commodity. Shri Joshi submits that the profits derived out of the sale of import entitlements cannot be attributed to the original manufacture and production and the profits that arise on the sale of these import entitlements are attributable only to the sale of entitlements and not to the manufacture and production of ferro manganese. In view of these rival co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an amount equal to eight per cent. thereof, in computing the total income of the company. The Supreme Court considered whether the profits and gains derived from sale of old machinery and buildings were attributable to the business of generation or distribution of electricity and in that connection considered the ambit of the expression attributable to Shri Justice Tulzapurkar, speaking for the Bench, observed (p. 93) "As regards the aspect emerging from the expression ' attributable to occurring in the phrase 'profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured import entitlement. The profits and gains accrued from the sale of such import entitlements have a direct bearing on the manufacture or production of ferro manganese, and the profits and gains are clearly attributable to the manufacture and production of the same. The Legislature has deliberately used the expression " attributable to " instead of " derived from " and has thereby shown clear intention to grant relief even in respect of receipts from sources other than the actual conduct of the business of manufacture or production of the specified item. In my judgment, the conclusion reached by the ITO and the Commissioner of Income-tax is clearly erroneous and cannot be sustained. Shri Khatri invited my attention to the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of manufacture of ferro manganese undertaken by the petitioner. It is obvious that the order under challenge which makes a departure from the earlier view is clearly illegal and the petitioners are entitled to the relief and are entitled to the grant of necessary tax credit certificate for the assessment years 1967-68 and 1970-71. It is not in dispute that there is no other impediment in the way of the petitioner to the grant of this certificate. Accordingly, the petition succeeds and the rule is made absolute, and while upholding the finding of the Commissioner of Income-tax that the manufacture and production of ferro manganese falls under Item 1A(2) of the First Schedule to the Industries (Development and Regulation) Act, 1951, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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