Judgment:
T. Kochu Thommen, J.
1. The following questions have been referred to us by the Income-tax Appellate Tribunal, Cochin Bench :
R. A. No. 6/Coch/1979 :
'1. Whether, on the facts and in the circumstances of the case, the moneys borrowed by the assessee are to be taken as capital employed for the purpose of computing the deduction under Section 80J of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case and on an interpretation of Section 80J, the relief could be restricted proportionately for nine months ?'
R. A. No. 7/Coch/ 1979 :
' Whether, on the facts and in the circumstances of the case, the plant and machinery used for extracting oil by the solvent extraction process from oil cakes qualify for development rebate at a higher rate ?'
R. A. No. 8/Coch/1979 :
'Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim Section 80HH deduction at 20% of the current year's income of the industrial undertaking without setting off against it the earlier years' losses, unabsorbed depreciation and unabsorbed development rebate '
R. A. No. 9/Coch/1979:
'1. Whether, on the facts and in the circumstances of the case, the moneys borrowed by the assessee are to be taken as capital employed for the purpose of computing deduction under Section 80J of the Income-tax Act?
2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim Section 80HH deduction at 20% of the current year's income of the industrial undertaking without setting off against it the earlier years' losses, unabsorbed depreciation and unabsorbed development rebate ?'
2. In the light of the decision in Lohia Machines Ltd. v. Union of India : [1985]152ITR308(SC) , we answer question No. 1 in R. A. No. 6/Coch/1979 in the negative, that is, in favour of the Revenue, and against the assessee. Question No. 2 in R. A. No. 6/Coch/1979 has to be answered in the negative, that is, in favour of the assessee and against the Revenue, in the light of the decision of this court in CIT v. English Indian Clays Ltd. : [1984]149ITR112(Ker) . We do so. The question in R. A. No. 8/Coch/1979 has to be read deleting the word 'losses' appearing after the words 'earlier years' because the question as to losses does not arise from the order of the Tribunal. The question when so read has to be answered, in the light of the decision of the Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India : [1985]155ITR120(SC) , in the negative, that is, in favour of the Revenue and against the assessee. We do so. Question No. 1 in R. A. No. 9/Coch/1979 has to be answered, in the light of the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India : [1985]152ITR308(SC) , in the negative, that is, in favour of the Revenue and against the assessee. We do so. Question No. 2 in R. A. No. 9/Coch/1979 has to be read without the word 'losses' appearing after the words 'earlier years'. The question as to losses does not arise from the order of the Tribunal. The question when so read has to be answered, in the light of the decision of the Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India : [1985]155ITR120(SC) , in the negative, that is, in favour of the Revenue and against the assessee. We do so.
3. The question that really arises for consideration in the present case is one in R. A. No. 7/Coch/1979. That question concerns entry 31 of the Vth Schedule to the Income-tax Act, 1961. This entry comes under Section 33(1)(b)(B)(i)(b) which provides for development rebate at twenty-five per cent. of the actual cost of the machinery or plant installed after March 31, 1970. The entry reads :
'Vegetable oils and oil cakes manufactured by the solvent extraction process from seeds other than cotton seed.'
4. It is not disputed that the assessee's machinery had been used for extraction of oil from oil cakes by the solvent extraction process. It is also not disputed that the machinery had not been used for extraction of oil or oil cakes directly from seeds. The assessee's claim for development rebate at 25 per cent. was rejected by the Income-tax Officer who allowed the same only at 15 per cent. for the reason that, on the admitted facts, the machinery had not been used for extraction of oil by any method whatever directly from seeds. On appeal, both the authorities found that the entry should be so read as to apply not only to cases of extraction of oil from seeds, but also whore oil is extracted, as the assessee does, by solvent extraction process from oilcakes. The entry when so read, the appellate authorities found, permitted the assessee the benefit of development rebate at 25 per cent.
5. Counsel for the Revenue, challenging the findings of the appellate authorities, submits that the entry has to be read literally, and, when so read, it can only be understood to be confined exclusively to extraction of oil directly from seeds by the solvent extraction process. Any other method of extraction of oil will not come within the scope of the entry.
6. Counsel for the assessee, Shri V. Rama Shenoi, referring to the available literature on the subject, submits that it is not possible for the assessee to use its machinery for extraction of oil directly from seeds by the solvent extraction process. Such extraction, he says, is totally unknown in Indian industry. What is done in this country is to extract oil 'from oilcakes, which are themselves produced out of seeds. Although the seeds are the ultimate source of oil, the immediate source of oil by solvent extraction process that is prevalent in Indian industry is oilcakes and not oil seeds. Counsel then submits that the entry would be futile, as found by the Appellate Assistant Commissioner, if it were to be so read as to be confined exclusively to extraction from seeds. Parliament, counsel says, would not have legislated on a futile entry. He, therefore, contends that the entry is wide enough to apply to a case of extraction of oil from oilcakes.
7. A legislative entry, in our view, must receive such construction as will be in accord with the legislative intent which must be gathered from the language in which the entry is couched. The language of this entry is clear and succinct. The court is not called upon to consider the utility or otherwise of an entry. When in unambiguous language the entry says, as it does, that it is confined to extraction of oil by solvent extraction process directly from seeds, except in the case of cotton seed, the entry must be so read and not in any other fashion. Why Parliament decided to introduce an entry so restrictively, and not wide enough to take in more than what it literally provides, is not a matter for consideration by this court. The admitted facts, therefore, militate against the findings of the appellate authorities. In the circumstances, the question in R. A. No. 7/Coch/1979 is answered in the negative, that is, in favour of the Revenue and against the assessee.
8. We direct the parties to bear their respective costs in these tax referred cases.
9. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.