HINDUSTAN WIRES PRODUCTS LIMITED vs. COMMISSIONER OF INCOME-TAX, PATIALA

CIVIL APPEAL No. 597/1985Supreme Court[1986] 3 S.C.R. 47807 August 1986Bench: 2 JudgesAuthor: R.S. PATHAK, SABYASACHI MUKHERJI HINDUSTAN WIRES PRODUCTS LIMITED9 pages
AI SummaryDismissed

What were the facts?

The appellant-assessee, Hindustan Wires Products Limited, claimed development rebate and deduction under Sections 33 and 80-I of the Income Tax Act, 1961, for assessment years 1966-67 to 1971-72. The claim was based on manufacturing insulated copper wires, which the assessee contended qualified as 'cables' under items 7, 17, and 24 of the Fifth Schedule (for AYs 1966-67 to 1968-69) and the Sixth Schedule (for AYs 1969-70 to 1971-72), classifying it as a 'priority industry'. The Income Tax Officer rejected the claim. The matter proceeded through the Appellate Tribunal, which initially ruled in favour of the assessee. However, the Revenue's reference to the High Court resulted in the High Court answering the questions in favour of the Revenue, holding that the wires manufactured were not for generation and transmission of electricity.

What did the Supreme Court hold?

The Supreme Court held that the High Court was correct in its decision. The Court interpreted item 7 of the Fifth Schedule, which refers to equipment for the generation and transmission of electricity, including transformers, cables, and transmission towers. By reading item 7 in conjunction with item 24 (component parts of machinery), the Court concluded that item 7 envisages complete, self-contained units of equipment or machinery for electricity generation and transmission. Therefore, 'cables' under item 7 must refer to cables identifiable as complete, self-contained units for this specific purpose, not mere components. The Court found that the assessee's sales accounts showed the manufacture and sale of 'winding wires' used in electrical gadgets and for transmission purposes, employed in coils and armatures. These winding wires could not be identified as 'cables' in the sense contemplated by item 7. Consequently, the principle laid down in Commissioner of Income-Tax, Tamil Nadu-V v. Dhandayuthapani Foundry (Private) Ltd. was deemed inapplicable. The questions referred to the High Court were answered in the negative, in favour of the Revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the assessee-company was entitled to the benefits conferred by the provisions of sections 33(1)(iii)(c)(a) and 80E of the Income Tax Act, 1961, for the assessment years 1966-67 and 1967-68? 2. Whether, on the facts and in the circumstances of the case, the assessee-company was entitled to the benefits conferred by the provisions of sections 33(1)(b)(B)(i) and 80-I of the Income Tax Act, 1961, for the assessment years 1968-69 to 1971-72? Assessee's contentions: The assessee argued that the insulated copper wires manufactured by it qualified as 'cables' under the relevant schedule items, entitling it to development rebate and deduction. It relied on the Madras High Court's decision in Commissioner of Income-Tax, Tamil Nadu-V v. Dhandayuthapani Foundry (Private) Ltd. to argue that the test for inclusion should be common usage and direct connection with the specified purpose, not exclusive use. Revenue's contentions: The Revenue contended, and the High Court held, that the wires manufactured were 'winding wires' used in electrical gadgets and not for the generation and transmission of electricity. The High Court found fresh evidence indicating this specific use, distinguishing it from 'cables' as conceived in item 7.

Which sections of the Income-tax Act were involved?

Section 33,Section 80E,Section 80-I

AI-generated summary — verify with the full judgment below

A HINDUSTAN WIRES PRODUCTS LIMITED ~- v. COMMISSIONER OF INCOME-TAX, PATIALA B AUGUST 7, 1986 [R.S. PATHAK AND SABYASACHI MUKHARil, JJ.] :#-- Income Tax Act, 1961, ss 33(i)(iii)(C)(A),33(l)(b)(B)(i), BOE, c 80-I and items 7, 17 and 24 of the Fifth Schedule-Manufacture of 'f insulated copper wires-Grant of development rebate & deduction in respect of profits and gains-Permissibility of - Section 33 of the Income Tax Act, 1961 provides for the grant of development rebate. The appellant-assessee, who carried on the busi- D ness of manufacture and sale of insulated copper wires, claimed for the assessment years 1966-67 to 1971-72 that it was entitled to the benefits conferred by ss. 33(i)(iii) (c)(A) and SOE read with items 7, 17 and 24 of the Fifth Schedule and ss. 33(i)(b)(B)(i) and 80-I read with items 7, 17 and 24 of the Fifth or the Sixth Schedule, as the case may be, for the aforesaid assessment years as a "priority industry". It contended be- E fore the Income Tax Officer that lite wires manufactured by it were covered by the word "cables" employed in the articles and things specified in items 7, 17 and 24 of the Fifth Schedule for the assessment years 19

The order continues below.

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