COMMISSIONER OF INCOME TAX vs. KIRAN SHIP BREAKING CO.

TAXAP/192/2003HC GujaratGJHC24025956200315 January 2004Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE A.M.KAPADIA3 pages
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What were the facts?

The appeal concerns the assessment year 1996-97. The assessee, Kiran Ship Breaking Co., claimed deduction under Section 80-IA of the Income-tax Act, 1961, for its ship breaking activity. The Income Tax Appellate Tribunal (ITAT) allowed this deduction, holding that ship breaking constitutes manufacturing or production of a new article or thing. The Commissioner of Income Tax (Revenue) appealed this decision to the High Court of Gujarat. The High Court noted a previous decision by another Division Bench in CIT v. Vijay Ship Breaking Corporation, which held that ship breaking is not manufacturing or production for the purpose of deductions under Sections 80HH and 80-I.

What did the High Court hold?

The High Court held that the Appellate Tribunal was not right in allowing the deduction under Section 80-IA. The Court reasoned that ship breaking activity does not amount to manufacturing or producing a new article or thing. This conclusion was based on a prior decision of another Division Bench of the same High Court in Commissioner of Income-Tax v. Vijay Ship Breaking Corporation, which held that ship breaking is not an activity of manufacture or production for the purpose of deductions under Sections 80HH and 80-I. The Court found the provisions of Section 80-IA to be similar to Section 80-I for the present controversy. The appeal was allowed in terms of this finding. The High Court certified the case as fit for appeal to the Supreme Court, as the assessee's counsel stated that an SLP had been granted leave by the Supreme Court against the Vijay Ship Breaking Corporation decision.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in allowing the deduction under Section 80-IA to the assessee, holding that ship breaking activity gives rise to manufacturing and production of an altogether new article or thing? (Question of law and fact, concerning Section 80-IA of the Income-tax Act, 1961). Assessee's contention: Not recorded in the judgment. Revenue's contention: The Revenue argued that ship breaking activity does not amount to manufacturing or producing a new article or thing, relying on the High Court's decision in Commissioner of Income-Tax v. Vijay Ship Breaking Corporation. The Revenue contended that the provisions of Section 80-IA are similar to Section 80-I for the purpose of this controversy.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80-IA,Section 80HH,Section 80-I,Section 261

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No 192 of 2003

For Approval and Signature:

HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Magistrate/M

The order continues below.

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