R.L.GULATI, J. - (1.) AT the instance of the CIT, Kanpur, the Tribunal, Delhi Bench "C", has submitted this statement of the case under S. 256(1) of the IT Act, 1961, seeking the opinion of this Court on the following question of law: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee -company derives income from manufacturing or processing of goods and that the rebate should be allowed at 30 per cent?"
(2.) THE assessee is a private limited company and is a partner in a partnership firm styled as Hill Hardware Company, New Delhi, in which it has 50 per cent share. While making the assessment for the year 1964 -65 the ITO had allowed a rebate @ 20 per cent in the computation of corporation tax. The assessee moved an application under S. 154 claiming that since the firm from which share income was derived was engaged in manufacturing business, the company itself should be deemed to be so engaged and rebate at 30 per cent should have been allowed. The ITO rejected the assessee's application on the ground that the assessee itself was not engaged in any manufacturing business and as such was not entitled to the rebate claimed by it. On appeal by the assessee, the AAC upheld the order of the ITO, on the ground that the alleged error in the rate of rebate was not an error apparent from the record and, as such, S. 154 was not applicable. The assessee then filed a second appeal before the Tribunal which held that the case fell within the purview of S. 154. It also held that the assessee was entitled to the rebate of 30 per cent relying on its earlier order dt. 10th Jan., 1968, in the assessee's own case for the asst. year 1965 -66 in which the Tribunal had taken the view that as the firm in which the assessee was a partner was engaged in a manufacturing business, the assessee should also be deemed to be so engaged. The CIT is aggrieved and has brought this reference before us. Before the Tribunal two questions were raised. The first question was as to whether S. 154 was applicable and the second question was as to whether the assessee was entitled to a rebate of 30 per cent. The Tribunal decided both the questions against the Department. The CIT has sought this reference only on the second question, namely, as to whether the assessee is entitled to a rebate at 30 per cent.
(3.) PART II of the Finance Act, 1964, prescribes the rates of super -tax and surcharge on super -tax. Paragraph D of that Part relates to every company other than the Life Insurance Corporation of India. The rate of super -tax prescribed in the case of a company is 55 per cent. Under the proviso a rebate is to be allowed to certain companies under specified circumstances. We are concerned with cl. (iii)(A) of the proviso, which says that in the case of a company, which is wholly and mainly engaged in the manufacturing or processing of goods, rebate would be at 30 per cent. on so much of its total income as does not exceed Rs. 2 lakhs and at 20 per cent. on the balance of the total income. The total income of the company, as computed by the ITO, is Rs. 1, 18,993, which is less than two lakhs of rupees. It is not clear as to how the ITO allowed the rebate at the rate of 20 per cent. The standing counsel for the Department has not been able to point out any provision under which a rebate of 20 per cent was admissible. However, that point is not material. The question now before us is as to whether the company is entitled to a rebate of 30 per cent ? It will be so entitled if it is wholly or mainly engaged in the business of manufacturing or processing of goods. Now, so far as the assessee -company is concerned, the only source of its income is its share in the partnership firm. It has no separate business of its own. Admittedly, the firm is engaged in a manufacturing business. The ITO himself has stated in para 4 of his order passed under S. 154 that "the assessee -company is a partner in the firm, Hill Hardware Co., 72 Janpath, New Delhi, which is engaged in the manufacturing operations." There was no dispute before the Tribunal on this point. The contention raised by the Department before the Tribunal as also before us is that merely because the firm in which the assessee is a partner is engaged in a manufacturing business, the assessee cannot be said to be so engaged.;