Law:

Section:

Section 80-I of the Income-tax Act, 1961 [as it stood before 1-4-1973]-Deductions-Profits and gains of priority industries-Assessee company manufactured limestone in its own quarries and out of that produced lime for sale-Whether manufacture of lime was a priority industry under section 80B(7) read with item 3 of sixth schedule and whether entitled to relief under section 80 -I qua profits derived from manufacture of lime-Held, on facts, yes Facts The assessee-company manufactured limestone in its own quarries and subsequently produced lime for sale. In order to meet its demands, it also got manufactured these goods through two other concerns S and D according to specifications and directions of its clients. The assessee claimed, inter alia, relief under section 80-I on profits derived from the (i) manufacture and sale of limestone from its own quarries, (ii) manufacture of lime on its own, and (iii) manufacture of lime and limestone through S and D. The ITO granted relief under section 80-I on the profits from the manufacture and sale of limestone which was a priority industry under section 80B(7), read with item 3 of the Sixth Schedule. He, however, did not extend this relief to profits mentioned in items (ii) and (iii). The AAC confirmed the ITO's disallowance. On further appeal, the Tribunal sustained the disallowance qua item (iii) above as there was no evidence to show any measure of control or supervision exercised by the assessee over the production of said items by S and D and to prove that the assessee itself was the manufacturer. It, however, granted relief under section 80-I to profits derived by the assessee from the manufacture of lime out of limestone produced in its own quarries, holding, inter alia, ( i) that such manufacture was a priority industry within the meaning of section 80B(7) read with item 3 of the Sixth Schedule ; and (ii) that lime was nothing but calcined limestone and its production was but an extension of the quarrying of limestone so that the production of lime and the production of limestone were integrated composite parts of one productive activity and both formed part and parcel of the assessee's integrated business. On…

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