M/S PRAKASH TRADING CO. versus COMMISSIONER OF INCOME TAX, GUJARAT

Citation: [1996] 2 S.C.R. 849 · Decided: 20-02-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

l. 
MIS. PRAKASH TRADING CO. 
A 
v. 
COMMISSIONER OF INCOME TAX, GUJARAT 
FEBRUARY 20, 1996 
[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.) 
B 
Income tax Act, 1961 : 
Finance Act, 1966: s.2(5)(a)(ii) and (iii); 2(5)(c) : 
c 
Finance Act, 1967: ss.2(4)(a)(ii) and (iii); 2(4)(c): 
lndust1ies (Development and Regu.lation) Act, 1951; Schedule I : In-
come Tax-Export/sale to exporter, of de-oiled cakes-Additional deduc-
tion-Held, not admissible on articles enumerated in clause(c) of s.2(5) of 
J966Act, and cl.(c) of s.2(4) of 1967 Act-Sub-clauses (ii) and (iii) of clause D 
(a) and clause (c) as also 1st Schedule to /.D.R. Act, refer to articles only. 
In order to encourage export of industrial goods, the Finance Acts 
of 1966 and 1967 provided that a person engaged in manufacturing of any 
articles in an industry enumerated in the First Schedule to the Industries E 
(Developm~nt and Regulation) Act, 1951 and exporting such articles or 
selling them to an exporter was entitled to an additional deduction as 
specified in Sub clauses, (ii) and (iii) of clause (a) of s.2(5) of 1966 Act and 
s.2(4) of 1967 Act. However, the articles mentioned in clause (c) of ss.2(5) 
and 2(4) of the two Acts respectively were excluded from the incentive. 
The appellant-assessee, a manufacturer of groundnut oil, claimed 
additional deduction on the amount received on export/sale to exporter of 
deoiled cakes under the provisions of ss.2(5)(a)(ii) and (iii) 1966 Act and 
s.2(4)(a)(ii) and (iii) of 1967 Act. The Income Tax Officer rejected the 
claim relying upon clause (c) of s.2(5) of 1966 Act and s.2(4) of 1967 Act. 
On appeal, the Appellate Assistant Commissioner accepted assessee's case 
that the above mentioned clause (c) referred to•articles as such and not to 
industries and since deoiled cake was not mentioned in clause (c), the 
assessee was entitled to additional deduction. This view was affirmed by 
F 
G 
by the Income Tax Appellate Tribunal. But on reference, the High Court 
decided the matter against the assessee. Aggrieved, the assessee filed the H 
849 
850 
SUPREME COURT REPORTS 
~. 
[1996] 2 S.C.R. 
A 
present appeals. 
On the question : Whether clause (c) of ss.2(5) and 2(4) of 1966 Act 
and 1967 Act respectively referred to articles mentioned therein or whether 
it referred to industries engaged in the manufacture of those articles : 
B 
Dismissing the appeals, this Court 
HELD : Sub-clauses (ii) and (iii) of clause (a) as also clause (c) of 
ss.2(5) and 2(4) of Finance Act, 1966 and Finance Act, 1967, respectively, 
refer to articles only, as does the First Schedule to the Industries (Develop· 
C ment and Regulation) Act, 1951 and, therefore, all of them must carry the 
same meaning and purport. Moreover, clause ( c) being an exception to sub-
clauses (ii) and (iii) must follow the same pattem as in the said sub-clauses. 
Just as the First Schedule to the I.D.R. Act mentions several articles under 
various heads, so does clause (c) of Section 2(5) of t~e 1966 Act and 
.Section 2(4) of the 1967 Act. The description is identical in both the First 
D Schedule and clause (c). (855-A-B] 
CIVIL APP~LLATE JURISDICTION: Civil Appeal Nos. 452 and 
453of1978. 
. 
From the judgment and. Order dated 31.8.77 of the. Gujarat High 
E Court ~ I.T.R. No. 70 of 1975 .. 
F 
Sameer Parekh fo~ P.H. Parekh for the Appellants. 
Dr. V. Gaurishankar, Anil Srivastava and S.N. Terdol. for the 
Respondents. 
The Judgment of the Court was delivered.by 
' 
' 
B.P. JEEV AN REDDY, J. : These appeals preferred by the assessee 
agait).st the judgment Of the Gujarat High ·c;:ourt answering the ~o ques· 
G tionS: referred to it, at the instance of the Revenue, in favour of the Revenue 
and against the assessee. The two question stated for the opinion of the 
High Court under Section 256(1) are: 
•i(l} Whether bn the facts and in the circ~~tances of the c~se, the 
assessee was entitled to claim deduction from tax in respect of . , 
H 
deoiled cakes exported or sold to exporters by it under section 
' 
PRAKASH TDG. CO. v. C.I.T. (B.P. JEEV AN REDDY, J.] 
851 
2(5)(a)(ii) and (iii) and Section 2(5)(c) of the Finance Act, 1966 A 
read with item No. 28 of the First Schedule to the Industries 
(Development and Regulation) Act, 1951 for the assessment year 
1966-67? 
(2) Whether on the facts and in the circumstances of the case the 
assessee was entitled to claim deduction from income-tax in B 
respect of deoiled cakes exported or sold to exporters by it under 
sec

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