Dr. M.K. Sharma, J.@mdashThe petitioners have preferred this writ petition challenging the legality and validity of the orders passed by the respondents refusing to grant to the petitioner No. 1 certificate in terms of s. 32A(2B)(ii) of the IT Act, 1961 hereinafter referred to as the Act for the asst. yrs. 1981-82 to 1985-86.
2. By a judgment and order dt. 4th Feb., 1987 this Court dismissed the aforesaid writ petition in liming. Being aggrieved by the aforesaid judgment and order of this Court the petitioner moved the Supreme Court and by order dt. 13th March, 1989 the Supreme Court set aside the order of this Court dismissing the writ petition in liming and remitted the matter back to this Court for fresh disposal of the writ petition by the High Court with a reasoned judgment supporting the view taken by the High Court. In pursuance of the aforesaid order passed by the Supreme Court this writ petition was taken up for admission and was admitted by this Court. This writ petition is accordingly taken up for hearing and being disposed of finally.
3. The petitioner No. 1 was and is engaged in the business of manufacture of Bansapati and allied products. In 1976 the petitioner decided to diversify into manufacture and production of writing and printing paper and with this end in view, the petitioner on 24th July, 1976 wrote a letter to the Director of Forest Research Institute, at Dehradun, wholly owned and financed by the Government of India, seeking technology process/know-how for manufacture of writing paper and craft paper from agricultural waste such as cereal straws and sabai grass and sarkanda, etc. The Forest Research Institute carried out an extensive laboratory test and pilot plant runs were carried out at the expense of the petitioner by using agricultural waste such as rice-straw, kana and kahi grass as the raw materials. Eventually a technology, process know-how using agricultural wastes and grasses as raw materials by using one common line for cleaning, refining and bleaching of the combination of the raw materials was evolved by Forest Research Institute for the manufacture of writing and printing paper. The said technology process and know-how was delivered to the petitioner by the Forest Research Institute under their letter dt. 31st March, 1978. In pursuance of the aforesaid process and know-how supplied by the Forest Research Institute in respect of the technology the petitioner set up its paper mill at village Sailakhurd, District Hoshiarpur and the said mill went into production in and around 10th June, 1980. The Forest Research Institute issued to the petitioner a certificate on 9th Oct., 1980 certifying that the petitioner No. 1 was using the said technology for manufacture of paper developed by Forest Research Institute and given to the petitioner No. 1. The petitioner thereafter filed an application in the prescribed form with the Secretary, Department of Science & Technology for grant of a certificate as provided for in s. 32A(2B) of the IT Act under their letter dt. 15th April, 1983. Thereafter it appears that a number of correspondences were exchanged between the petitioner and the Ministry of Science & Technology, Government of India and discussions with the various authorities had taken place in respect of the grant of the said certificate. On 23rd Aug., 1984 the ITO passed assessment order for the asst. yr. 1981-82 and rejected the claim of the petitioner for higher investment allowance on the ground that the petitioner failed to produce a certificate from the prescribed authority as required under s. 32A(2B)(ii) of the said Act for claiming such benefit. Finally the respondent No. 3 rejected the petitioner''s application for issue of a certificate under s. 32A(2B) of the IT Act as requested by them.
4. Respondents No. 1 and 3 contested the writ petition by filing their counter affidavit contending, inter alia, that the aforesaid request of the petitioners was rejected by the concerned respondents in view of certain variations which were stated to be four in number and detailed in paragraph 9 of the counter affidavit. According to the respondents the following four are the variations for which the request of the petitioner for grant of license could not be acceded to :
(a) The Forest Research Institute trial report indicated use of rice straw and grasses only whereas the company has been using rice straw and wheat straw along with grasses.
(b) The Forest Research Institute stipulated 7 :30 as the ratio of the rice straw and grasses in the furnish whereas the company''s consumption figure indicated ratio of 6 :40 (approx.), i.e., 60% rice + wheat straw and 40% grasses.
(c) The process parameters as laid down by the Forest Research Institute were compared with those in actual practice as supplied by the company for 60 GSM paper. The comparison revealed that process parameters of Forest Research Institute were not followed by the company.
(d) The Forest Research Institute has informed the Department that they do not have any agreement with the company for the manufacture of writing, printing and craft paper.
5. The learned counsel appearing for the petitioner submitted before us that the petitioners fulfilled all the requirements of s. 32A(2B) of the IT Act and Therefore, entitled to a certificate in terms of the provisions of the Act. According to the learned counsel for the petitioners, the respondents in refusing to grant the certificate ignored all the relevant material and information and took into account irrelevant and extraneous materials and acted arbitrarily and with complete non-application of mind. The learned counsel appearing for the petitioner further submitted before us that the alleged four variations mentioned in the counter affidavit which are set out herein above could not and do not alter or change the character of the technology process and know-how which was developed by the Forest Research Institute, Dehradun, which according to the learned counsel was and is being used by the petitioners for the manufacture of writing, printing and craft paper. He further submitted that the use of wheat straw instead of rice straw could not and does not alter and/or change the technology process and/or know-how which are developed by the Forest Research Institute, and Therefore, the actions of the respondent in refusing to grant a license to the petitioners are bad in law.
6. Mr. Madan Lokur, learned counsel appearing for respondent Nos. 1 and 3 submitted before us that there were substantial variations in the consumption of caustic soda, straw to cooking liquor ratio maximum cooking temperature, etc., from the technology developed by the Forest Research Institute from which it is proved and established that the petitioners were not following the process technology and know-how developed by Forest Research Institute and accordingly, they were rightly refused grant of a certificate in terms of s. 32A(2B) of the IT Act.
7. Mr. B. Gupta, learned counsel appearing for the IT Department, submitted before us that the IT Act is a self-contained code, and as such if a person seeks a relief or lower rate of tax he must bring himself strictly within the terms of the statute before he can claim that benefit and the petitioners having failed to do so in the present case, they were not entitled to get the said benefit. In support of his contention the learned counsel relied upon two decisions of the Supreme Court in
8. We have given our thoughtful consideration to the rival submissions of the learned counsel for the parties and also perused the relevant records connected with the issues involved in the present case.
9. Before analysing the rival contentions of the parties on the basis of the records produced before us we may appropriately refer to the provisions of s. 32A(2B) of the IT Act, which reads as follows :
"Sec. 32A(2B). -
Where any new machinery or plant is installed after the 30th day of June, 1977, but before the 1st day of April, 1987, for the purposes of business of manufacture or production of any article or thing and such article or thing -
(a) is manufactured or produced by using any technology (including any process) or other know-how developed in, or
(b) is an article or thing invented in,
a laboratory owned or financed by the Government, or a laboratory owned by a public sector company or a university or by an institution recognised in this behalf by the prescribed authority,
the provisions of sub-s. (1) shall have effect in relation to such machinery or plant as if for the words "twenty five per cent", the words "thirty five per cent" had been substituted, if the following conditions are fulfilled, namely :
(i) the right to use such technology (including any process) or other know-how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner;
(ii) the assessed furnishes, along with his return of income for the assessment year for which the deduction is claimed, a certificate from the prescribed authority to the effect that such article or thing is manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory; and
(iii) the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule.
Explanation. - For the purposes of this sub-section, -
(a) "laboratory financed by the Government" means a laboratory owned by any body [including a society registered under the Societies Registration Act, 1860 (21 of 1860)] and financed wholly or mainly by the Government;................
(c) "University" means a university established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under s. 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a university for the purposes of that Act."
A bare reading of the aforesaid provision makes it apparent that an assessed is entitled to claim 35% deduction towards investment allowance in respect of plant and machinery installed after 30th June, 1977 and before 1st April, 1987 provided the said assessed installs the said new machinery or plant before the aforesaid dates for the purpose of business or manufacturing of any article or thing which is manufactured or produced by using any technology (including any process) or other know-how developed in a laboratory owned or financed by the Government.
10. Mr. Madan Lokur, appearing for the respondents, also drew our attention to a condition added thereto which is required to be fulfilled before the benefit provided for under s. 32A(2B) could be availed of. According to him, the condition is that there must exist a right to use such technology including any process or other know-how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner. According to the learned counsel, the act of deriving the technology from a laboratory owned or financed by the Government is not enough and that there must be an added condition thereto to avail of the said benefit, i.e., to mandatorily have a contract with the said laboratory owned or financed by the Government.
11. In the light of the aforesaid provisions of law referred to above and the submissions made by the learned counsel for the parties on the basis thereof, let us examine as to whether the petitioners are entitled to be issued with such a certificate or not and/or whether the petitioners are entitled to claim benefit of the provisions of s. 32A(2B) of the IT Act or not. It is not disputed that the aforesaid technology process or know-how was developed by the Forest Research Institute, Dehradun, which was handed over to the petitioner and a certificate in that respect has also been issued by the said Forest Research Institute. The only dispute that is raised in the present petition is that the process parameters of the technology including the process and know-how developed and given by the Forest Research Institute were not being used by the petitioners for the purpose of their business of manufacture or production of writing, printing and craft paper. According to the respondents, the petitioners have used wheat straw instead of rice straw and that there has been substantial variation in the process parameters delivered by the Forest Research Institute. The respondents No. 1 and 3 also produced before us a comparative chart showing deviations undertaken by the petitioners from the original technology developed by the Forest Research Institute.
12. A bare reading of the said chart would show that for pulping the petitioners have been using soda process for rice straw and also for kana and kahi grass and for bleaching and paper making also they have been using the same process as handed over to them by the Forest Research Institute. However, on a perusal of the said chart it appears to us that there are certain variations in using the specifications. In this connection, our attention has been drawn to the letter dt. 27th Nov., 1986 (Annexure A to the supplementary affidavit) issued by the Forest Research Institute wherein it has been stated that in commercial production to meet the specifications given by the customers such as substance physical strength properties, brightness, etc., some changes in process parameters are necessary, such as cooking condition, bleaching condition, ratio of straw and grass pulps, conditions in stock preparation and paper making and that such changes do not amount to any change in the process technology or know-how developed by the Forest Research Institute.
13. In view of such statements coming from an authoritative expert organisation, we are of the view that the petitioners did not commit any major deviation so as to be deprived of from getting a certificate in terms of s. 32A(2B) of the Act. Further the use of wheat straw instead of rice straw cannot or does not alter or change the technology process or know-how which are developed by the Forest Research Institute inasmuch as technology, process or know-how developed by the Forest Research Institute was based upon the use of agricultural waste such as cereal straws and wheat straws mixed with kana grass and kahi grass as is conclusively proved and established from the aforesaid letter of the Forest Research Institute.
14. In view of the aforesaid circumstances the deviations in the specifications by the petitioners as shown to us by the counsel for the respondents through the comparative chart cannot be said to have altered or changed the technology process and know-how developed by the Forest Research Institute, Dehradun. Besides, in view of the language and terms of the letter dt. 27th Nov., 1986 issued by the Forest Research Institute, we hold that the said Institute has transferred and given the right to use the said technology developed by it to the petitioners and accordingly the condition No. 1 referred to us by the counsel representing the respondents No. 1 and 3 is also satisfied in the present case.
15. In view of our aforesaid findings and conclusions the submissions of the learned counsel for the Revenue are held to be inapplicable on the facts and circumstances of the case as the petitioners are seeking the benefit in the present case after satisfying the requirements in terms of s. 32A(2B) and within the parameters thereof.
16. The learned counsel for the respondents No. 1 and 2 submitted that this Court should not sit as a Court of appeal over the decision of respondents No. 1 and 3. We have come to the aforesaid conclusion that there is no change or alteration either in the technology or in the process or in the know-how as delivered by the Forest Research Institute on the basis of the statements coming from an expert body like Forest Research Institute and as such, the said submissions also have no relevance at all.
17. Under the aforesaid circumstances and in view of our conclusion that the petitioners for the purpose of their business of manufacture or production of writing, printing or craft papers have used the technology including the process and know-how developed by the Forest Research Institute which is wholly owned and financed by the Government, we cannot, but further hold that the petitioners are entitled to be issued with a certificate as provided for to enable to get the benefit of the provisions of s. 32A(2B).
18. In the result, this writ petition is allowed and we set aside and quash the impugned orders issued by respondent No. 3 refusing to issue a certificate to the petitioners in terms of s. 32A(2B) of the Act and direct the concerned respondents to issue such a certificate in order to enable the petitioners to claim deductions as provided for under s. 32A of the Act. However, in view of the facts and circumstances of the case we make no order as to costs.
