COMMISSIONER OF INCOME-TAX, HARYANA ETC. ETC. vs. KRISHNA COPPER STEEL ROLLING MILLS JAGADHRI ETC. ETC.

CIVIL APPEAL No. 104/1979Supreme Court1991 INSC 28812 November 1991Bench: 3 JudgesAuthor: S. RANGANATHAN, N.D. OJHA, V. RAMASWAMI OF INCOME16 pages
AI SummaryDismissed

What were the facts?

The assessees, engaged in manufacturing mild steel rods, bars, or rounds, claimed entitlement to a higher rate of development rebate under Section 33(1)(b)(B)(i)(a) and relief under Section 80-I of the Income-Tax Act, 1961, by asserting their products fell under item 1 of the Fifth Schedule. The Income-Tax Officer rejected this claim. However, the Appellate Assistant Commissioner, the Tribunal, and the High Court accepted the assessees' contention. The Revenue appealed these decisions to the Supreme Court. The dispute centers on whether the products manufactured by the assessees qualify for the specified incentives.

What did the Supreme Court hold?

The Supreme Court dismissed the appeals filed by the Revenue. The Court held that in interpreting provisions granting concessions to basic industries, the historical background and legislative intention to encourage national development must be considered. Incentives should be construed broadly. The Court distinguished between 'iron and steel (metal)' and 'articles made therefrom'. Ingots, billets, and blooms are 'semi-finished steel', while bars, rods, and rounds are 'finished' forms of iron and steel. The Court emphasized that the nature of the article manufactured, not the type of mill, is determinative. Mild steel rods, bars, or rounds are considered finished forms of the metal and constitute raw material for manufacturing other articles of iron and steel. The Court also noted that even if these products were not strictly 'iron and steel (metal)', they might fall under 'forgings and castings' mentioned in item 11 of the Fifth Schedule, though it did not express a final opinion on this point as it was not relied upon by the assessees earlier. The High Court's conclusion that the assessees were entitled to the higher development rebate was upheld.

What were the issues?

1. Whether mild steel rods, bars, or rounds manufactured by rolling mills constitute 'iron and steel (metal)' as contemplated by item 1 of the Fifth Schedule to the Income-Tax Act, 1961, for the purpose of higher development rebate under Section 33(1)(b)(B)(i)(a) and relief under Section 80-I. Assessee's contentions: The manufacture of ingots, billets, and blooms is an intermediate stage, resulting in semi-finished steel. When converted into plates, bars, or rods, it becomes finished steel. These finished forms of iron and steel are raw materials for further manufacturing of iron and steel articles. The products are iron and steel in a finished form, not just the raw metal. Revenue's contentions: Iron and steel cease to be a metal when it comes out of the furnace as ingots. Ingots become semi-finished products like billets, blooms, and slabs. The expression 'iron and steel (metal)' refers to these semi-finished products. Subsequent products like rails, rods, bars, etc., are articles made of iron and steel, and rolling mills producing bars and rods are not covered by item 1 of the Fifth Schedule.

Which sections of the Income-tax Act were involved?

Section 33(1)(b)(B)(i)(a),Section 80-I

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME-TAX, HARYANA ETC. ETC. A v. KRISHNA COPPER STEEL ROLLING MILLS JAGADHRI ETC. ETC. NOVEMBER 12, 1991 [S.RAJilGANATHAN, V.RAMASWAMI AND N.D.OJHA, JJ.] Income-tax Act, 1961-Sections 33(1)(b)(B)(i)(a), 80-I -ConstrUction-Historical background-Relevance of----Legislative inten- tion.

Income-tax, Act, 1961-Sections 33(1)(b)(B)(i)(a). 80-I, Fifth Sched- ule, item 1-Manufacture of mild steel rods, bars or rounJs-Whether entitled to a higher rate of development rebate and relief under-"Semi- finished Steel" and "Finished Steel"-Constrnction "Forging and cast- , ings" whether articles made of iron and steel. B c The respondents-assessees were engaged in the manufacture of D ~ild steel rods, bars or rounds. They claimed that as the articles manufactured by them fell under item 1 of the list set out in the· Fifth Schedule, they were entitled to a higher rate of development rebate specified in section 33(1) (b) (B) (i) (a) and to relief under section 80-I of the Income-Tax Act, 1961. The Income-Tax Officer rejected the claim of the assessees, whereas the Appellate Assistant Commissioner, the Tribunal and High Court accepted their claim. Hence the Reve

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