COMMISSIONER OF INCOME TAX Vs. MITTAL STEEL RE ROLLING AND ALLIED INDUSTRIES PRIVATE LIMITED

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Cochin Bench, has referred the following question for our opinion :

(2.) THE years of assessment are 1967-68, 1968-69 and 1969-70. It was agreed that the assessee was entitled to the development rebate for all the three assessment years. THE only question in dispute was whether the rate of such rebate should be 20 per cent. as contended by the department or 35 per cent. as claimed by the assessee. THE claim of the assessee was that the rebate at the rate of 35 per cent. as provided in Section 33(l)(iii) (c)(A)(a) as it stood at the relevant time should be allowed for the year 1967-68 and not 20 per cent. under Section 33(1)(iii)(c)(B)(a). THE relevant part of the section is in these terms:

(3.) IT is clear that by a manufacturing process the assessee was producing M. S. rods and steel sections. IT is not disputed that M. S. rods and steel sections produced from mild steel billets and mild steel ingots are iron and steel. The argument put forward on behalf of the department was that, in view of the word "metal" occurring within brackets after the words "iron and steel" in item (1) of Schedule V to the Act, the item has to be interpreted as meaning that the iron and steel will have to be produced from raw materials such as iron ores. In other words, the contention was that this item will be applicable only to cases where iron and steel are produced for the first time by a manufacturing process for the purpose of the business of the assessee. That the articles, M.S. rods and steel sections, have been produced for the business of the assessee, there has been no controversy. The contention that something produced out of mild steel rods which was already iron will not fall under item (1) of the Fifth Schedule to the Income-tax Act, 1961, was negatived by the Tribunal relying on the decision of the Supreme Court in State of Madhya Bharat v. Hiralal [1966] 17 STC 313 (SC). The contention therein was that "iron and steel" in item (39) in Part I of Schedule I of Notification No. 58 issued granting exemption from the provision of the Madhya Bharat Sales Tax Act, 2007S. will not apply to bars, flats and plates in which the assessee was a dealer but will apply only to iron and steel (metal). This was a converse case. But we think the principle of the decision can be applied. The question is in substance what is the article that is manufactured. Is it "iron or steel". Iron and steel are metals. So by the addition of the word "metal" there is no change of meaning. If, on the other hand, it is taken that by the addition of the word "metal" the result advanced in argument would follow : the entry will get very limited, as being applicable only to the manufacture of iron and steel at the initial stage. We do not think that there is any justification for so limiting the entry. As the Supreme Court has held that bars, flats and plates are "iron and steel", we have also to hold that M.S. rods and steel sections manufactured by the assessee are "iron and steel". The addition of the word "metal" within brackets after the words "iron and steel", we do not think is intended to limit the scope and ambit of the entry. There is no justification for qualifying item (1) in the Fifth Schedule by insisting that the articles produced or manufactured or constructed for the purpose of the business of the assessee must be those produced, manufactured or constructed from materials which are not iron and steel. There is nothing in the Act or scheme or in the section which expressly or by implication indicates that the item must be limited in the manner contended on behalf of the revenue. We, accordingly, answer the question referred to us in the affirmative, that is, in favour of the assessee and against the department. We direct the parties to bear their respective costs.