I.S. Israni, J. - (1.) THIS reference application has been filed under Section 256(2) of the Income-tax Act, 1961, by the Commissioner of Income-tax, Rajasthan.
(2.) IT is submitted by Shri V.K. Singhal, learned counsel, that the assessee-firm is dealing in the business of precious, semi-precious, rough stones and gold and silver articles including export and import of rough and precious stones. The assessee claimed deduction under the Explanation to Sub-section (1A) of Section 35B. The Income-tax Officer found that the assessee did not fulfil the conditions laid down in Sub-section (1A). An appeal was preferred against this order which was allowed by the Appellate Assistant Commissioner on the basis of other judgments and not on the basis of facts of the assessee's case. Thereafter, the petitioner submitted a second appeal to the Income-tax Appellate Tribunal and the Tribunal upheld the order of the appellate authority. IT is contended by learned counsel that the assessee-firm is not a small scale industrial undertaking within the definition given in Clause (2) of the Explanation according to which the value of the machinery and plant installed in the business should not exceed Rs. 10 lakhs. IT is submitted that the assessee is not registered as a small scale industrial undertaking either with the Director of Industries or with the Labour Department and has no plant or machinery. Therefore, the question whether the particular unit is an industrial undertaking is a pure question of law. It is submitted by Shri N.M. Ranka, learned counsel, that the assessee is an industrial undertaking and has tools and machinery the list of which is mentioned even in the order of the Inspecting Assistant Commissioner of Income-tax dated March 29, 1982, which was produced for perusal. It is pointed out that the whole process is done in the premises of the assessee, for small jobs like polishing, etc., are done on contract basis. Therefore, no question of law arises for reference. It is also contended that it is not necessary that the assessee should have machinery and plant before it can be taken to be a small scale industrial undertaking. We have heard both the parties. In the order dated March 29, 1982, passed by the Inspecting Assistant Commissioner of Income-tax, it has been mentioned in para 13 that "in the absence of any details submitted by the assessee-firm, either before the Income-tax Officer or before me, it is difficult to examine the allowability of the claim." It means that the assessee-firm itself is not sure about its claim under Section 35B of the Act. The claim under Section 35B is admissible from April 1, 1978, only to an assessee who is engaged in the business of export of goods and is either a small scale exporter or a holder of an export house certificate. The assessee does not possess any certificate of being an export house from the Chief Controller of Imports and Exports, Govt. of India. The assessee is also not a small scale industrial undertaking because it does not own machinery and plant within the meaning of Clause (2) of the Explanation below Sub-section (2) of Section 32A as discussed by the Income-tax Officer in para 9 of the draft assessment order. On these facts and in these circumstances, the Income-tax Officer has rightly disallowed the claim of the assessee made under Section 35B of the income-tax Act, 1961. We are, therefore, of the opinion that a question of law does arise out of the order of the Tribunal. We, therefore, direct the Tribunal to state a case and refer the following question for our decision : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is a small scale manufacturer and exporter and, consequently, entitled to deduction under Section 35B of the Income-tax Act, 1961 ?" The reference is disposed of as above. ;