- (1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated May 20, 1981, in respect of the assessment years 1972-75 to 1974-75 under Section 256(1) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 154 of the Income-tax Act, 1961, could not have been invoked in this case ?"
(2.) WHILE submitting the returns, the assessee claimed development rebate at 25 per cent. which was allowed by the Income-tax Officer initially. Subsequently, proceedings under Section 154 were initiated on the ground that the assessee was doing oil production work by installing oil expellers and, therefore, in accordance with entry 51 of Schedule V to the Act, the assessee is not entitled for development rebate at 25 per cent. The assessee was given an opportunity to show cause as to why the development rebate should not be withdrawn. The assessee submitted in writing that the product of the assessee is covered by item 31 of Schedule V to the Income-tax Act and it was also stated that the manufacturing of vegetable oil and oil cakes does also involve processing of seeds. The Income-tax Officer was of the view that the assessee is not falling in item 28 or item 31 of Schedule Y and, therefore, the assessment orders were rectified under Section 154 and development rebate allowed at the rate of 25 per cent. was reduced to 15 per cent. Against the order passed by the Income-tax Officer, an appeal was preferred to the Appellate Assistant Commissioner who came to the conclusion that since the assessee was not entitled in accordance with the specific entry of the Schedule, therefore, it is a matter which falls within the meaning of mistake apparent from record and liable to be rectified under Section 154 of the Act. The order of the Appellate Assistant Commissioner was challenged before the Income-tax Appellate Tribunal and the Tribunal found that entry 28 of the Schedule V to the Act refers to processed seeds and the authority below has not given any reason as to why the said entry would not cover the product manufactured by the assessee. It was also found that it requires a long-drawn process of reasoning and arguments and, therefore, proceedings under Section 154 could not have been taken. We have considered the arguments of learned standing counsel for the Revenue. The entries at items Nos. 28 and 31 of the Fifth Schedule to the Income-tax Act, 1961, are as under : "(28) Processed seeds. (31) Vegetable oils and oilcakes manufactured by the solvent-extraction process from seeds other than cotton seed." So far as the contention of the assessee that the item falls in entry 31 of the Fifth Schedule is concerned, it is not supported by anything on record. The entry itself mentions that vegetable oil and oilcakes should be manufactured by the solvent-extraction process. If the said items are manufactured by a process other than the solvent-extraction process, then special development rebate of 25 per cent. is not applicable. In respect of the other entry 28, the Tribunal has not given a definite conclusion that the product falls within that item or not and has proceeded on the assumption that the difference between processed seeds and the product manufactured by the assessee has not been stated. It is necessary to refer to the provisions of Section 33 of the Act which provide for development rebate in respect of plant and machinery which are used in the manufacture or production of any one or more of the articles or things specified in the list in Schedule V. The development rebate is to be calculated on the cost of the plant and machinery and is available if the item falls within the category of the list specified in Schedule V. The items referred to in the Fifth Schedule are, therefore, the products in respect of machinery and plant for which development rebate is available. The processed seeds which have been mentioned at item 28 refer to such of the final products which are manufactured or produced and for which a unit is established and the unit could be said to be for processed seeds. Even in common commercial parlance production of oil and oilcakes cannot be considered to be a unit for processing seeds. There are a number of seeds which are processed and for which units are established. The special rate of rebate is applicable to those units and not whore the seed is crushed and oil is extracted. A specific entry is available in item 31 for production of vegetable oils and oilcakes manufactured by the solvent-extraction process from seeds other than cotton seed. Admittedly, in the present case, the vegetable oil and oilcakes are not produced by the solvent-extraction process and the industry established by the petitioner cannot be said to be for processing seeds. If the item does not fall in any category of the list on the basis of which development rebate is given and a mistake has been committed by the Income-tax Officer to give development rebate at the higher rate, the power under Section 154 could be exercised. The matter with regard to processed seeds as to whether the product of the petitioner falls under item 28 of Schedule V, was duly considered by the Commissioner of Income-tax (Appeals) as well and it was found that the said item does not fall within the category of processed seeds. Since we have come to the conclusion that the production of items contemplated under Section 33 to have special development rebate on the products which are mentioned in the Fifth Schedule and the products manufactured by the assessee cannot be considered to be processed seeds or vegetable oil/oilcakes produced by the solvent-extraction process, the Income-tax Officer had committed a mistake which is apparent from the record and, therefore, the action of the Income-tax Officer in rectifying the order was in accordance with law. Accordingly, it is held that the Tribunal was not justified in holding that Section 154 of the Income-tax Act could not have been invoked in this case.
(3.) THE reference is answered in favour of the Revenue and against the assessee. No order as to costs.;