- (1.) Heard learned counsel for the parties.
(2.) This income tax reference has been made by the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad in R.A. Nos.4, 5 and 6 (Alld) of 1995 for the assessment year 1990-91 and 1991-92, CIT, Kanpur v. M/s Kothari Products Ltd., Kanpur for the opinion of the High Court on the following questions of law:- "1. Whether on the fact and circumstances of the case, the Hon'ble ITAT was justified in holding that the Zarda/ Yukta, Pan Masala is not a tobacco preparation within the meaning of item No.2 of XIth schedule of the I.T. Act. 2. Whether in the facts and in the circumstances of the case the Hon'ble ITAT Allahabad has misdirected itself in holding that the ratio decidendi of the decision rendered by the Hon'ble Supreme Court of Inida in the case of Radhey Shyam, Gudakhu Factory State of Orissa, does not apply to the present time. 3. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has miscarried the facts of Radhey Shyam Gadakhu Factory Vs. State of Orissa and thereby erred grievously in not appreciating the true import and meaning of the test of essential and effective ingredient" as evolved by the Hon'ble Supreme Court of India, in the above mentioned case and thus misapplied the ratio to the facts of the instant case resulting in an unjustified and patently erroneous relief?"
(3.) M/s Kothari Products Ltd.-the assessee is carrying out the business of manufacture and sale of Pan Masala of various varieties including Sada Pan Masala and Zarda Yukta Pan Masala. It claimed deduction under Section 80-I of the Income Tax Act, 1961 (in short the Act) on the profit and gains derived from the industrial undertaking engaged in the manufacture and sale of Pan Masala. Besides deduction under Section 32 AB was also claimed on the amount utilised and purchased of new machinery and amount deposited in national bank as per Clause (a) and (b) of sub-section (1) of Section 32AB of the Income Tax Act.;