JUDGMENT R.K. Agrawal, J.
1. The Income-tax Appellate Tribunal Delhi, has referred the following three questions of law under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act", for the opinion of this court :
"1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding that the assessee was a recognised export house and a small scale exporter who was manufacturing and producing articles and hence was entitled to weighted deduction under Section 35B of the Income-tax Act, 1961, relying merely on the export house certificate dated February 19, 1979, was valid for the period February 19, 1979, to June 30, 1979, only which is after the relevant accounting year ?
2. Whether, on the facts and in the circumstances of the case, the case of the assessee fell under the definition of small scale industrial unit as mentioned in Section 35B(1A) Explanation (d) read with Clause (2) of Explanation below Section 32A(2) of the Income-tax Act ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was mainly engaged in the manufacture and processing of articles ?"
2. The present reference relates to the assessment year 1979-80. The respondent-assessee is a registered firm. The previous year ended with Kartik Badi 14, Samvat 2035. During the assessment proceedings, the respondent had claimed weighted deduction under Section 35B of the Act. The respondent does not fully manufacture the items under export. The Assessing Officer allowed the deduction under Section 35B of the Act prior to April 1, 1978. However, for the period from April 1, 1978, to the end of October, 1978, he declined to grant deduction under Section 35B of the Act on the ground that the respondent is not a small scale industrial undertaking and the certificate of export house issued by the Government of India, Ministry of Commerce, New Delhi dated February 9, 1979, was effective from February 19, 1979, to June 30, 1979, and therefore could not be taken into consideration.
3. The first appeal filed by the respondent on this point did not meet with any success. However, in further appeal the Tribunal had granted weighted deduction under Section 35B for the period April 1, 1978, onwards on the ground that the respondent had filed certificate issued by the U. P. Government registering it as a small scale industrial unit and the export house certificate issued by the Government of India, Ministry of Commerce which is in relation to the year 1978-79. It had held that the evidence on record meets the requirement of law and therefore the respondent was a recognised export house and a small scale exporter entitled to weighted deduction under Section 35B of the Act.
4. We have heard Sri Govind Krishna, learned counsel for the Revenue. Nobody has put in appearance on behalf of the assessee.
5. Learned counsel for the Revenue submitted that the export house certificate was effective from February 19, 1979, till June 30, 1979, and therefore could not have been taken into consideration, he submitted that the respondent did not fulfil the conditions mentioned in Sub-section (1A) of Section 35B of the Act and therefore weighted deduction under Section 35B of the Act for the period April 1, 1978, onwards was not admissible. The contention is misconceived. Under Sub-section (1A) of Section 35B of the Act as it stood during the relevant period, weighted deduction under Section 35B was admissible if the assessee is engaged in the business of export of goods and is either a small scale exporter or a holder of a Export House Certificate. Under the Explanation to Sub-section (1A) a small scale exporter means a person who exports goods manufactured or produced in any small scale industrial undertaking or undertakings owned by him. Small scale industrial undertaking has been given the meaning assigned in Clause (2) of the Explanation below Sub-section (2) of Section 32A of the Act. Subsection (1A) of Section 35B along with Explanation is reproduced below :
"(1A) Notwithstanding anything contained in Sub-section (1), no deduction under this section shall be allowed in relation to any expenditure incurred after the 31st day of March, 1978, unless the following conditions are fulfilled, namely--
(a) the assessee referred to in that sub-section is engaged in-
(i) the business of export of goods and is either a small-scale exporter or a holder of an Export House Certificate ; or
(ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know-how, to persons outside India ; and
(b) the expenditure referred to in that sub-section is incurred by the assessee wholly and exclusively for the purposes of the business referred to in Sub-clause (i) or, as the case may be, Sub-clause (ii) of Clause (a).
Explanation.--For the purposes of this sub-section,--
(a) 'small-scale exporter' means a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertakings owned by him :
Provided that such person does not own any industrial undertaking which is not a small-scale industrial undertaking;
(b) 'Export House Certificate' means a valid Export House Certificate issued by the Chief Controller of Imports and Exports, Government of India ;
(c) 'provision of technical know-how' has the meaning assigned to it in Sub-section (2) of Section 80MM ;
(d) 'small-scale industrial undertaking' has the meaning assigned to it in Clause (2) of the Explanation below Sub-section (2) of Section 32A."
6. Clause (2) of the Explanation below Sub-section (2) of Section 32A reads as follows :
(2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed,--
(i) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees ;
(ii) in a case where the previous year ends after the 31st day of July, 1980, but before the 18th day of March, 1985, twenty lakh rupees ; and
(iii) in a case where the previous year ends after the 17th day of March, 1985, thirty-five lakh rupees, and for this purpose the value of any machinery or plant shall be,--
(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee ; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.''
7. Thus from a reading of Clause (2) of the Explanation to Section 32A(2) of the Act, an industrial undertaking is deemed to be a small scale industrial undertaking where the value of any machinery or plant installed for the purpose of the business of undertaking did not exceed ten lakh rupees.
8. In the present case, the Government of Uttar Pradesh has issued a certificate registering the respondent as a small scale industrial unit during the year in question. The limit of investment, in any small scale industrial undertaking was not more than ten lakh rupees. Thus, it fulfill the requirement of the small scale industrial undertaking. Moreover, the Export House Certificate has been issued for the year 1978-79 which would cover the period in question, even though its validity has been specified from the date of issue, i.e., February 19, 1979, till June 30, 1979. The Tribunal has considered the registration certificate issued by the State Government as also the Export House Certificate and has come to the conclusion that the respondent was a small scale industrial undertaking. The said finding is based on appreciation of evidence and materials on record and does not suffer from any legal infirmity.
9. In view of the foregoing discussions, we answer all the questions referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.