COMMISSIONER OF INCOME TAX, GUJARAT versus CELLULOSE PRODUCTS OF INDIA LTD.

Citation: [1991] 3 S.C.R. 888 · Decided: 04-09-1991 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, GUJARAT 
v. 
CELLULOSE PRODUCTS OF INDIA LTD. 
SEPTEMBER 4, 1991 
B 
[S. RANGANATHAN, V. RAMASWAMI AND N.D. OJHA, JJ.] 
c 
D 
Income Tax Act 1961: Sections 84 and 261-New Industrial 
Undertaking-Exemption-Commencement of period-When arises. 
'1'he respondent is a Public Limited Company incorporated on 
April 14, 1989 for carrying on business of manufacturing chemical 
products particularly of Carboxy Methyl Cellulose (CMC) and Cellu-
lose Pulps. The respondent was also granted an industrial licence by the 
Central Government for the manufacture of Carboxy Methyl Cellulose. 
The respondent had installed a cellulose plant in which cellulose pulp, 
the raw material for Carboxy Methyl Cellulose was manufactured. The 
plant had begun production from March 1961 while the production of 
Carboxy Methyl Cellulose was started from June 15, 1961. 
The respondent claimed relief under section 84 of Income Tax Act· 
as it stood prior to its being deleted with effect from April 1, 1968 by 
Finance Act (2) 1967, for the assessment year 1966-67, the previous 
E 
year of accounting being the financial year 1965-66. 
The Income Tax Officer took the view that since the respondent 
had started production of cellulose pulp from March, 18 1961, it had 
begun to manufacture or produce finished articles or goods in the year 
ending March 31~ 1961 and consequently the assessment year 1961-62 
F 
was the first year in which the auesse e was entitled to relief under· 
section 84 Sub-section (7) of tile Income Tax Act under which the relief 
contemplated was to be available only for five aSsessment years. So. the 
respondent was not entitled to relief in the assessment year 1966-67 
which fell beyond the afOresaid period. 
G 
The above view the lllcome Tax Officer was affirmed in appeal by 
the Appellate As.mtant Commissioner. Even the Income Tax Appellate 
Tribnnal held that the respondent having begun production or 
manufacture of finished product which was capable of being sold in the 
market in the year of accounting relevant to the assessment year 1961· 
62 the last year in which the respondent was entitled to get relief under 
H 
section 84 of the Act was the assessment year 1965-66 and the claim for 
888 
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C.I.T. v. CELLULOSE PRODUCTS 
889 
the relief in the assessm-ent year 1966-67 was not maintainable. The 
High Court on reference, held that the mere fact that the respondent 
started production of Cellulose Pulp which was an interm;odiate product 
• . on March 18, 1961 did not mean that the company had begun to pro· 
duce or manufacture "articles" in the assessment year 1961-62 because 
the· word "articles" used in Sub-section (7) of section 84 in the context, 
could be only the end product of the industrial undertaking as a whole 
where there was no phased programme of installation and construction. 
Allowing the appeal of the Revenue with costs, the Court, 
A 
B 
HELD: The High Court on the facts and circumstances of the 
instant case committed an error in interfering with the conclusion of the 
Tribunal. It is settled law that a High Court while hearing a reference C 
nnder the Act does not exercise any appellate or revisional or super· 
visory jurisdiction over the Tribunal and it acts purely in an advisory 
capacity. Further in the instant case the finding of the Tribunal did not 
suffer from any infirmities such as not being supported by any evidence 
or being perverse or patently unreasonable. The production of Cel· D 
lulose Pulp during the month of March, 1961 was a finished product 
which was a marketable commodity. It is true that Cellulose Pulp also 
constitutes raw material for manufacture of Carboxy Methyl Cellulose 
and the circumstances that the industrial licence granted to the respon-
dent was for the manufacture of Carboxy Methyl Cellulose which also 
included the manufacture of Cellulose Pulp which was intermediate E 
product to be used in its turn as a raw material for the manufacture of 
Carhoxy Methyl Cellulose. The relvent clause of the Memorandum of 
Association of the respondent company is obviously wide in its amp-
litude and as such comtemplates "manufacture of chemical products of 
any nature and kind whatsoever and particularly of Carboxy Methyl 
Cellulose, Cellulose Pulp and other chemical products." So the High F 
Court obviously committed an error in holding that the manufacture of 
Cellulose Pulp during March 1961 was of no consequence and that the 
first year of product

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