TMI Blog1981 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, the ITO took the view that the relief under s. 80-I was not admissible because the assessee's undertaking which manufactured straw-board was not a "priority industry " within the meaning of the said section inasmuch as straw-board was not comprehended within the meaning of the words " paper and pulp The assessee carried the matter in appeal. The AAC reversed the decision of the ITO and upheld the claim and granted the relief. The matter was carried in further appeal before the Income-tax Appellate Tribunal at the instance of the Revenue. Before the Tribunal, the contention on behalf of the Revenue was: (i) that deduction under s. 80-I was admissible only in respect of profits and gains from a priority industry, (ii) that " priority industry ", as defined, meant, inter alia, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule, (iii) that the relevant item in the Sixth Schedule, namely, item 16, specified " paper and pulp including newsprint " as the articles or things, and (iv) that straw-board, which is used for packing purposes, is not covered by the said item, even though like paper it is manufactured out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hings and at item 16 thereof was included " paper and pulp including newsprint ". Section 80E was deleted and, in its place, s. 80-I was introduced by the Finance (No. 2) Act, 1967, with effect from April 1, 1968. Sub-section (1) of s. 80-I is material for the purposes of this case and, when enacted, it read as follows : " 80-I. Deduction in respect of Profits and gains from Priority industries in the case of certain companies.-(1) In the case of a company to which this section applies, where the gross total income includes any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company." To complete the legislative history, though we are not concerned with the subsequent changes, it might be stated that in the above subsection, the words " five per cent." were substituted for the words "eight per cent." by the Finance (No. 2) Act, 1971, with effect from April 1, 1972. Section 80-I itself came to be deleted by the Finance Act, 1972, with effect from April 1, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was identical to that of manufacture of paper, (4) the handling of the applications for import licences for machinery and other accessories of straw or card-board mills through the Pulp and Paper Directorate, (5) the inclusion of strawboard under the heading " Paper and pulp including paper products " in item 24 of the First Schedule of the Industries (Development and Regulation) Act, 1951, and (6) the use of straw-board as a packing material. It was held that even if two interpretations were possible, one in favour of the Revenue and the other in favour of the assessee, the interpretation which was favourable to the subject was required to be adopted and that, accordingly, the interpretation which supported the assessee and which required straw-board to be treated as " paper " had to be accepted. The above decision in CIT v. Straw-Board Mfg. Co. Ltd. [1975] 98 ITR 78 (P H ) , which has considered the matter from different angles and which has given plausible reasons, is on all fours (with the present case). The decision is based upon statutory provisions in pari materia. Indeed, s. 80E was the precursor of s. 80-I and, so far as the point under consideration is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not convincing. The question, however, is whether we should look at the matter as if it has fallen for decision for the first time and proceed to ascertain the true meaning of the word " paper " occurring in item 16 of the Sixth Schedule and merely because another view can possibly be taken, we should readily dissent from the decision. Two considerations are relevant while examining the question. First, it is a settled legal position that if two interpretations of a taxing provision are possible, the interpretation which is favourable to the assessee should be accepted and that which is favourable to the Revenue should be discarded. In the instant case, since one High Court has taken a possible view which is favourable to the assessee, even if another possible view favourable to the Revenue can be adopted, such futile exercise may be avoided, for, ultimately, the view in favour of the assessee might have to be taken. Secondly, in income-tax matters, which are governed by an all-India statute, when there is decision of another High Court on the interpretation of a statutory provision, it would be a wise judicial policy and practice not to take a different view (whatever one's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st ordinarily accept that view of the interpretation of a section or a provision of a taxing statute which is an all India statute, as a matter of practice and policy. The Division Bench observed, in terms, that it was in respectful agreement with this salutary practice and policy in the interest of uniformity and consistency in matters of application of a taxing statute, so as to avoid the challenge of discrimination in the application and administration of tax matters. It would thus appear that it has been the consistent practice and policy of the Bombay High Court followed by this High Court that except in exceptional cases, such as those referred to earlier, if one High Court has interpreted the provision or section of a taxing statute, which is an all India statute, and there is no other view in the field, this High Court should ordinarily accept that view in the interest of comity of judicial decisions and consistency in matters of application of a taxing statute. Following the said practice and policy, we would hold, along with the Punjab and Haryana High Court, that straw-board is covered by the term " paper " occurring in item 16 of the Sixth Schedule and that, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by the item " paper " occurring in s. 2(a)(vii) of the Essential Commodities Act, 1955 (hereinafter referred to as " the Commodities Act "), as also in entry 13 of Sch. to the Gujarat Essential Articles Dealers' (Regulation) Order, 1971 (hereinafter referred to as " the Regulation Order "). The Commodities Act and the Regulation Order enlisted items which were regarded as essential commodities or essential articles, as the case may be, and " paper " was one of such commodities or articles. Both the Commodities Act and the Regulation Order contained an identical description of " paper in the following words: "Paper, including newsprint, paper-board and straw-board. Exercise books or exercise note-books were not specifically covered at the material time in the description. The argument, inter alia, was that they should not be treated as covered within the meaning of the word de paper ", especially when there was an inclusive definition which included only newsprint, paper-board and straw-board but not exercise books or exercise note-books. While dealing with this contention, it was observed that when construing the word " paper " occurring in the Commodities Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material part of the decision might create such an impression, closer analysis would reveal that there is no justification for such a view. It must be remembered, in the first place, that the question which directly arose in that case was not whether straw-board would be regarded as " paper " by people conversant with the subject-matter, but whether exercise books were " paper ". In the next place, the decision was not rendered in the context of a taxing statute but in regard to an item enlisted in the Commodities Act and a statutory order promulgated thereunder, which called for a purposive interpretation. The principle of construction which was invoked for interpreting the word " paper " was not the one which is relevant in the context of a taxing statute, namely, the common parlance test, but the rule that the meaning of a word was to be found bearing in mind the object or purpose of the Act. This is clear not only from the observations made in para. 6 of the judgment but also from a later decision in Hindustan Aluminium Corporation Ltd. v. State of U.P. [1981] 48 STC 411; AIR 1981 SC 1649, wherein, while making a reference to this decision, it was observed that that constru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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