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Issues involved: Interpretation of development allowance under section 33A of the Income-tax Act for the assessment year 1982-83.
In the judgment delivered by the High Court of Madras, the court addressed the issue of the assessee, a tea manufacturing company, claiming development allowance under section 33A of the Income-tax Act for the assessment year 1982-83. The Assessing Officer had initially denied the claim based on the timing of planting and replanting activities. However, the Tribunal ruled in favor of the assessee, leading to the Revenue challenging this decision before the High Court. The Tribunal referred to the decision of the Kerala High Court in a similar case, which was later confirmed by the Supreme Court. The apex court emphasized that development allowance under section 33A could be granted in a subsequent year and should not be limited to the year of expenditure or the immediate next year. It was noted that the actual cost of planting should be considered over a span of four years for computing the development allowance, which is granted in two stages as per clauses (a) and (b) of the section. The court highlighted that the assessee had the right to defer making the claim for development allowance and could benefit from any enhancements in the applicable law. It was clarified that the law prevailing on the first of April of the relevant assessment year should be applied, regardless of when the activities related to the claim were undertaken. The Assessing Officer was obligated to apply the law as it stood in the year of assessment, without deeming repealed figures for earlier years to remain in effect. Ultimately, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue regarding the entitlement to claim deduction under section 33A(7), proviso (ii), at the rate of Rs.35,000 per hectare for the assessment year 1982-83.
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