- (1.) ON an application under s. 256(1) of the IT At, 1961, Tribunal has referred the following questions for the opinion of this Court : For asst. yr. 1983-84 to 1985-86 "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that deduction under s. 80-I of the IT Act, 1961, was allowable to the assessee-company even though the industrial undertaking was not run by the assessee itself." For asst. yr. 1985-86 "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting addition made under s. 43B ?"
(2.) THE relevant assessment years are 1983-84 to 1985-86. THE entire factory premises including machinery, etc. were leased out by the assessee-company to M/s Pratap Rajasthan Special Steels Ltd. w.e.f. August, 1981. No manufacturing activities were carried on by the assessee-company itself as the entire plant had been leased out from the very first month of the previous year relevant to asst. yr. 1983-84 till whole of the previous year relevant to asst. yr. 1985-86. THE assessee though had not manufactured any article or things, but claimed deduction under s. 80-I. That claim has been rejected by the AO. Assessee preferred an appeal before the CIT(A), CIT(A) has also dismissed the appeal of the assessee. In appeal before the Tribunal, Tribunal has followed the decision of Madras High Court in case of CIT vs. Universal Radiators (P) Ltd. (1981) 128 ITR 531 (Mad) and decision of Calcutta High Court in case of CIT vs. Flender Macneill Gears Ltd. (1984) 41 CTR (Cal) 60 : (1984) 150 ITR 83 (Cal) and held that when the word `derived' has been used in the section, no manufacturing activity need be done by the assessee itself. Though he does not manufacture any article or things, assessee is entitled for deduction under s. 80-I of the Act. Heard learned counsel for the parties. Mr. Mathur, learned counsel for the applicant, submits that unless the assessee manufactures or produces any article or things himself/itself, the assessee is not entitled for benefit of s. 80-I. The conditions laid down in sub-s. (2) of s. 80-I are mandatory. He placed reliance on the decision of Delhi High Court in case of CIT vs. Northern India Iron and Steel Co. Ltd. (1997) 226 ITR 342 (Del), CIT vs. Phoenix Scrap Processors (1995) 123 CTR (Bom) 329 : (1995) 211 ITR 341 (Bom) and CIT vs. Mahavir Rubber Works (2002) 175 CTR (Raj) 90 : (2002) 256 ITR 667 (Raj). On the other hand, Mr. Kasliwal, learned counsel for the assessee-respondent, submits that there was no requirement under the provisions of s. 80-I that assessee himself should manufacture article or things. Though he has given factory on hire to third party and manufacturing is also by third party, in spite of that the assessee is entitled for benefit of s. 80-I of the Act, 1961, Mr. Kasliwal placed reliance on the decision of Madras High Court, which has been relied on by the Tribunal in case of CIT vs. Universal Radiators (P) Ltd. (supra), CIT vs. Flender Macneill Gears Ltd. (supra), CIT vs. Western Mechanical Industries (P) Ltd. (1991) 92 CTR (Bom) 79 : ( 1991) 187 ITR 265 (Bom), CIT vs. U.P. State Agro Industrial Corporation Ltd. (1991) 93 CTR (All) 214 : (1991) 188 ITR 370 (All) and decision of their Lordships in case of CIT vs. Shaan Finance (P) Ltd. (1998) 146 CTR (SC) 110 : (1998) 231 ITR 308 (SC). The facts are not in dispute that no manufacturing activities are carried on by the assessee.
(3.) IN CIT vs. Mahaveer Rubber Works (supra), this Court has taken the view that requirements under the provisions of cl. (iv) of sub-s. (4) of s. 80J are mandatory. Unless assessee fulfils all these conditions, assessee is not eligible for benefit of s. 80J of the Act. In CIT vs. Northern India Iron and Steel Co. Ltd. (supra), Delhi High Court has taken the view that assessee has leased its machinery and had no control over the use of machinery, could not be said that assessee manufactured or produced any article or things, not entitled for deduction under s. 80J of the Act, 1961. In CIT vs. Phoenix Scrap Processors (supra), the Bombay High Court has taken the view that for deduction under s. 80J, the condition precedent, inter alia, is that assessee itself should run the industrial undertaking and derive profit and gains from that. ;