JUDGMENT
S.B. Sinha, C.J.
1. At the instance of the Revenue, two questions, which are in the following terms, have been referred by the Income-tax Appellate Tribunal for the opinion of this court, under Section 256(1) of the Income-tax Act, 1961 (in short “the Act”) :
“1. Whether, on the facts and in the circumstances of the case and having regard to the provisions of Section 35(2)(iv), the Tribunal was justified in holding that the assessed was entitled to claim depreciation in the assessment year 1972-73 in respect of scientific equipment of the value of Rs. 1,47,305 purchased during the immediately preceding year after the expenditure in respect thereof had been allowed in full under Section 35(2) in that preceding year ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessed was engaged in the business of production of limestone and was hence entitled to deduction under Section 80I of the Act ?”
2. Although the questions are required to be answered separately, it may be profitable to note the facts of the matter at the outset. The respondent is a company engaged in the business of manufacture of cement production for which limestone has to be extracted. It has its own refractories division. The company during the assessment year 1972-73 claimed depreciation on the scientific equipment of the value of Rs. 1,47,305. The said claim was allowed.
3. In relation thereto the first question has been referred to this court for its opinion. As regards the question it may be noticed that there is no dispute with regard to the fact that the respondent industry is a priority industry. Its claim for relief under Section 80I of the Act read with item No. 12 of Schedule VI appended thereto have been rejected on the ground that the said provision was not applicable.
4. On appeal, the Appellate Assistant Commissioner pointed out that no doubt the profits of the assessed had arisen from the sale of cement but the profits of the assessed for commercial purpose should be computed at the various stages of production, namely, production of limestone, and thereafter the profits should be taken for the purpose of ascertaining the final profit by way of sale of cement and cement products. Emphasis was laid by the assessed on the fact that its business was also production of limestone and manufacture and sale of cement. The Appellate Assistant Commissioner allowed the said claim of the assessed against which an appeal was preferred before the Tribunal. A contention was raised before the Tribunal that the respondent did not sell limestone produced by it, but only utilised the same for its own business for manufacturing purposes and thus, it was not entitled to the relief in terms of Section 80I of the Act. We may at this stage, refer to the order of the learned Tribunal dated March 1, 1977, which is in the following terms : “I have carefully considered the arguments advanced by learned counsel and the reasons given by the Income-tax Officer for disallowance and the relevant cases cited with reference to the two cases reported in Anil Starch Products Ltd. v. CIT [1966] 59 ITR 514 (Guj) and Tata Iron and Steel Co. Ltd. v. State of Bihar . The assessed was entitled to the relief under Section 80I when cement was in existence in the Sixth Schedule. The only change that took place was that cement was deleted from the Sixth Schedule whereas limestone as in the past continued to exist and the activity of the assessed was not only confined to sale of cement but production of limestone and manufacture of cement and it was not a question of selling goods to oneself at a profit at one stage but it was a question of allocating the final profit to the various processes involved in obtaining the final product. The profits of the assessed no doubt finally arose from the sale of cement but the profits of the assessed for commercial purposes should be computed at the various stages of production, namely, production of limestone, and thereafter profits are taken for purpose of ascertaining the final profit by way of cement and sale thereof. The assessed had also filed an audited statement ascertaining the profits as a result of production of limestone by applying the market rate. That it was possible to compute profits on the basis of the transfer of the limestone to the final stages at the market price was, therefore, clear. It is, therefore, the contention of learned counsel that profits could undoubtedly be computed separately in respect of the two activities carried on by the assessed which was already in existence in earlier year. Business of the assessed itself was production of limestone and manufacture and sale of cement. In the light of the principles laid down in the various cases cited by learned counsel and in particular the two decisions, one in the case of Tata Iron and Steel Limited and the other of the Gujarat High Court in the case of Anil Starch Products Ltd. v. CIT [1966] 59 ITR 514,1 am of the view that the assessed was entitled to relief under Section 80I and the claim made by the assessed should have been allowed by the Income-tax Officer accordingly. The Income-tax Officer will now compute the admissible relief on the basis of the claim made by the assessed.”
5. Mr. Pandey, learned counsel appearing on behalf of the Revenue, would submit that having regard to the provisions contained in Section 35(1)(iv) of the Act as the assessed had taken the benefit thereof, the question of claiming depreciation therefore in terms of Section 35(2)(iv), which was inserted by the amending Act of 1971, with effect from April 1, 1972, item No. 12, did not arise.
6. The question, therefore, which arose before the Tribunal was whether, having regard to the amendment in the aforementioned provision, the claim
could have been allowed in favor of the assessed. The said question appears
to be now covered by a decision of the apex court in the case of CIT v. Indian
Telephone Industries Ltd. [1991] 187 ITR 181. We may notice that the Karnataka
High Court in the case of CIT v. Indian Telephone Industries Ltd. [1980] 126
ITR 548, held that the assessed could claim the said amount by way of incentive. The apex court reversed the said decision keeping in view the amendment brought about by reason of Act No. 2 of 1980 stating that as the amendment having been brought with retrospective operation, the appeals were to
be allowed. Learned counsel appearing on behalf of the respondent would
submit that despite the aforementioned decision of the apex court, the Bombay High Court, having regard to the hardship of the Act, having been faced
by the assessed, by reasons of its being of retrospective effect and retrospective operation, held the said provision to be ultra vires and unconstitutional in
the case of CIT v. Hico Products Pvt. Ltd. and CIT v.
S. H. Kelkar and Co. Pvt. Ltd. . We are afraid that in
exercise of jurisdiction under Section 256(2) of the Act, we cannot go into the
aforementioned question. The jurisdiction of this court is limited. In any
event, the question of vires of the said Act had not been raised before us. We,
therefore, are unable to go into the said question herein in this manner. Question No. 1, must, therefore, be answered in the negative and in favor of the
Revenue.
7. Question No. 2 : Mr. Pandey, learned counsel appearing on behalf of the Revenue, would submit that the said question also stands covered by a recent decision of the Division Bench of this court in the case of CIT v. Dalmia Cement (Bharat) Ltd. [2002] 253 ITR 725 (Case No. ITR No. 87 of 1981), disposed of on September 13, 2001. Mr. Pandey, would contend that like the said case, in the instant case also there is no material on record that there is some integrated and/or continuous process from which both lime and limestone came out.
8. Ms. Rangaswamy, learned counsel appearing for the respondent, on the other hand, would submit that in view of finding of facts arrived at by the learned Tribunal as also the Appellate Assistant Commissioner, it is clear that mining of quarries of limestone and manufacture of cement constitute an integrated process. Learned counsel would urge that the said question stands squarely covered by a Supreme Court decision in the case of Tata Iron and Steel Co. Ltd. v. State of Bihar , as also the decisions of the Gujarat High Court in the case of CIT v. Saurashtra Cement and Chemical Industries Ltd. [1973] 91 ITR 170, the Calcutta High Court in the case of CIT v. Hindustan Motors Ltd. [1981] 127 ITR 210 and the Madras High Court in the case of CIT v. Chitram and Co. Pvt. Ltd. [1991] 191 ITR 96.
9. The fact that in the instant case, the assessed had been carrying on the mining operation of limestone for the purpose of manufacture of cement is not in dispute. From the order of the Appellate Assistant Commissioner, it stands admitted that not only a finding of fact has been arrived at to the effect that the activity of the assessed is not only confined to sale of cement but also production of limestone and manufacture of cement. It has further been found that it was not a case where the question arose in regard to earning of profit by the assessed at one stage but it was a matter where final profits were required to be allocated to various processes involved in obtaining the final profit. An audited statement has also been filed by the assessed for the purpose of showing that the profit as a result of production of limestone by applying the market rate can be ascertained. The authority had also arrived at a finding that profit on the basis of transfer of limestone to the final stages at the market price could be computed. In the case of Tata Iron and Steel Co. Ltd, , the apex court, although it was interpreting the provisions of sections 5, 6 and 72 of the Bengal Cess Act, 1880, observed (page 134):
“In other words, is it the position that if there is loss of that identity the concept of a profit arising from the production of that commodity also disappears ? We find it difficult to appreciate the ratio behind the contention that if the mined ore is processed, and the processed product commercially goes under another name, because the processing results in extensive modifications of the raw material, then the sale of the finished product can in law yield no ‘profit’ from the working of the mine.”
10. The apex court took into consideration the fact that the mined ore is processed and the processed product commercially goes under another name but the erosion thereof, it cannot be said that the sale of the finished product can in law yield no profit from the working of the mine. It was held that (page 139) :
“That even in cases where the profit resulting from an ultimate activity is brought to tax there could be an apportionment if there were an exemption in respect of the profits resulting from distinct activities at earlier stages is illustrated by the provisions of the Indian Income-tax Act itself. Thus, in the case of, say, a sugar mill, which grows its own cane, in the absence of any exemption for the income derived from agriculture, i.e., from the production of the cane, the entire profit of the mills from the sale of the sugar would have to be included in the taxable profits under Section 10 of the Income-tax Act. But Section 4(3)(vii) exempts agricultural income as defined in Section 2(1). The result, therefore, is that there is a. disintegration or dichotomy of the ‘incomes, profits or gains’ of the business and of agricultural income, so that there has to be an apportionment between the two in order to determine the taxable income of an assessed. It is on account of this situation that Section 59(2) of the Income-tax Act provides for rules being made for prescribing the manner in which and the procedure by which incomes derived in part from agriculture and in part from business shall be arrived at.”
11. We may notice that the learned Tribunal categorically held that the decision of the Supreme Court in Tata Iron and Steel Co. Ltd.’s case , fully covers the case of the assessed. It proceeded to hold :
“Since it is common ground that the assessed excavates and produces limestone from its quarries, this is a business activity in which the assessed was engaged for purposes of earning profit. Section 80B(7) does not require that the business of producing an article or thing mentioned in the Sixth Schedule should be an independent business by itself and that it should not be an adjunct of some other business carried on by the assessed. We are, therefore, of the view that the production of limestone is an activity incidental to the assessed’s business and, therefore, the assessed has to be held to be engaged in the business of producing limestone.”
12. The matter has received the attention of the Gujarat High Court and the Calcutta High Court while considering the question as to whether it started the activity of extraction at different stages for the purpose of manufacturing and in the result, depreciation allowance and development rebate could be granted as held in the case of CIT v. Saurashtra Cement and Chemical Industries Ltd. [1973] 91 ITR 170 (Guj), and in the case of CIT v. Hindusthan Motors Ltd. . In Saurashlra Cement’s case [1973] 91 ITR 170 (Guj). Bhagwati C. J. (as his Lordship then was) in no uncertain terms stated that the extraction of limestone constituting the first stage of the business was as important an activity of the business as utilisation of limestone in the manufacture of cement. In Hindusthan Motors Ltd.’s case , Sabyasachi Mukharji, the learned C. J. (as then was), held that relief provisions must be strictly construed and observed as under (page 217) :
“But in construing the provisions of the relief, if the logical conclusion is, in some context, the assessed might be entitled to relief in respect of part of the units which is utilised for its production, it does not become disentitled to it, is now fairly well settled.”
13. The court, in support of the said conclusion, relied upon various decisions including Tata Iron and Steel Co. Ltd.’s case . The court again in the case of CIT v. Standard Motor Products of India Ltd. [1981] 131 ITR 300 (Mad) held that (page 304) :
“Thus, if an assessed can carry on business of manufacturing other goods and still be eligible for the relief, there is no reason why the assessed cannot use the listed item produced by him in making other goods. The taxing authorities are required to see whether the profits attributable to the manufacture of any one of more of the listed articles form part of the taxed income. If so, the assessed would be eligible for the rebate. The contention to the contrary by learned counsel for the Commissioner has thus neither logic nor language to commend it.”
14. In the case of CIT v. Chitram and Co. Pvt. Ltd. [1991] 191 ITR 96 (Mad), the said decision was followed by the Division Bench of the Madras High Court wherein it was clearly observed (page 102) :
“We are of the view that the principle of this decision would squarely stand attracted to this case as well and the Tribunal was, therefore, quite right in holding that the manufacture of gears by the assessed which formed a component part in the cranes and winches manufactured by the assessed would entitle the assessed to relief under Section 80I of the Act in respect of the portion of the profits attributable to such manufacture.”
15. In the aforementioned backdrop, the unreported decision of the Division Bench of this court in Dalmia Cement (Bharat) Limited (since reported in [2002] 253 ITR 725), has to be considered. Before this court a contention was raised that the assessed’s business in quarrying the limestone was not covered by the activity envisaged under Section 80I of the Act. It was contended that what was utilised in the manufacture of cement is lime and admittedly limestone was not the product, which goes into the composition of cement. On the basis of the material on record, the Bench came to the conclusion that the assessed’s activity was quarrying of the limestone and there was no material on record as there was some integrated and/or continuous process from which both lime and limestone came out. It is on the aforementioned ground alone that the decision of the Calcutta High Court in the case of CIT v. Sutna Stone and Lime Co. Ltd. [1982] 138 ITR 37, was distinguished.
16. However, in this case, as noticed hereinabove, the Appellate Assistant Commissioner of Income-tax as also the Tribunal had arrived at a finding of fact, which had not been disputed by the Revenue, that the production of limestone is done at a stage for the purpose of manufacture of cement. As noticed hereinbefore it was further held that from the audited statement, it was possible to compute the profits on the basis of the transfer of limestone to the final stages at the market price. The decision of the Division Bench of this court in Dalmia Cement’s case [2002] 253 ITR 725 is, therefore, distinguishable on the facts. Keeping in view the decision of the apex court in the case of Tata Iron and Steel Co. Ltd. v. State of Bihar and the decision of the other High Courts following the same, we are of the opinion that the Division Bench of this court in Dalmia Cement’s case [2002] 253 ITR 725, cannot be considered to have constituted a precedent. We may notice that in the case of Regional Manager v. Pawan Kumar Dubey, , the apex court has clearly held that (headnote) :
“It is the rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar. One additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case to similar facts.”
17. For the reasons aforementioned, we are of the opinion that the second question must be answered in the affirmative.