Sabyasachi Mukharji, J. - (1.) The assessee is a public limited company engaged in the production of limestone and it is a public limited company having a large turnover and assessed for over Rs. 5,40,000 for the assessment year 1970-71. This reference relates to the deduction given by the ITO under Section 80-1 in respect of the priority industry run by the assessee. The assessee manufactures limestone in its own quarries and, subsequently, produces lime for sale. In order to meet demands it also gets manufactured these goods through two other concerns, namely, Sanderson & Co. and Dewan Lime Co. The said concerns manufactured limestone and lime on the assessee's account according to the specifications and instructions, of the clients of the assessee. The assessee claimed relief under Section 80-1 on profits derived from it from the three following items : (i) profits derived from the manufacture and sale of limestone on its own quarries ; (ii) profits derived from the manufacture of lime on its own; and (iii) profits derived from the manufacture of lime and limestone through Sanderson & Co. and Dewan Lime Co.
(2.) As the assessee ran a priority industry as covered by item 3 of Schedule VI to the I.T. Act, 1961, the ITO granted to the assessee relief under Section 80-1 on the profits from the manufacture of limestone. He, however, did not extend this relief or concession to two other items. The AAC approved the reasoning and conclusion of the ITO on appeal. He was of the opinion that at best the profits from the manufacture of limestone alone were entitled to concession under Section 80-1, The profits derived by the assessee from the manufacture of lime, either quicklime or slaked lime, were not covered by item 3 of Schedule VI or, for that matter, by any other item in that Schedule. The AAC was, therefore, of the opinion that relief under Section 80-1 could not be extended to such profits. He was also of the opinion that the profits on the sale of limestone and lime manufactured or sold for the assessee were not eligible for the concession under Section 80-1 of the Act as the assessee itself did not manufacture these items. It merely got these manufactured through others. In the result, the ITO's conclusion were upheld.
(3.) There was a further appeal before the Tribunal. The Tribunal after referring to the rival contentions observed, inter alia, as follows: " 7. As regards the profits derived by the assessee from the sale of items manufactured through others, we find that no written agreements are available showing any measure of control or supervision, if any, exercised by the assessee over the production of the said items by the other two concerns. The Tribunal's decision relied upon by the assessee in support of its stand on this issue is distinguishable as in that case there was a written agreement and the assessee in that case was associated with each and every stage of production. In this case before us, the assessee merely got the goods manufactured from the other two concerns, according to specifications and instructions of its clients or customers. In the absence of any evidence as regards the control and supervision, if any, exercised by it over the production of these items through others, we are not in a position to extend relief Under Section 80-1 to the assessee in respect of these profits derived by it from the sale of items manufactured through others. In the absence of necessary evidences, we cannot say that in this matter the assessee itself was a manufacturer. The basic conditions having not been satisfied the assessee fails on this point. 8. As regards relief Under Section 80-1 to the profit derived by the assessee from the sale of lime, we find that the assessee has a good case. Lime is nothing but calcined limestone and the production of lime is but an extension of the quarrying of limestone. The production of lime and the production of, limestone are integrated, composite parts of one productive activity of the assessee. Both of them form part land parcel of the assessee's integrated business. We have, moreover, to see the purpose for which relief is granted Under Section 80-1 for a priority industry. This relief is meant to provide sufficient incentive for the growth of specified industries. It has been held more than once by the High Courts that provisions relating to exemption, particularly in respect of industrial growth, have to be liberally construed. A narrow and constricted view of the items would not be apposite for our purpose.";