1994 (12) TMI 15 - HC - Income Tax

Summary

Issues involved:
The issue involved in this case is whether the assessee-company was entitled to development rebate on machinery and plant installed in the year ending 30th June, 1974, relevant to the assessment year 1975-76.

Judgment Details:

Background:
The assessee-company claimed development rebate on machinery worth Rs. 9,33,528 installed in the year ending 30th June, 1974. The machinery was ordered by a firm before the stipulated date of December 31, 1973, and was received and installed by the assessee-company after taking over the firm's business on December 31, 1973.

Revenue's Objection:
The Commissioner of Income-tax initiated proceedings under section 263, contending that the assessee was not entitled to the rebate due to section 16(c) of the Finance Act, 1974. The Commissioner directed the withdrawal of the rebate, which was earlier allowed by the Income-tax Officer.

Tribunal's Decision:
The Income-tax Appellate Tribunal ruled in favor of the assessee, stating that the contract for the machinery was entered into before the stipulated date, fulfilling the requirements of section 16(c) of the Finance Act, 1974. The Tribunal set aside the Commissioner's order and restored the development rebate.

Legal Analysis:
The Court analyzed the provisions of section 33 of the Income-tax Act, 1961, the notification discontinuing development rebate after May 31, 1974, and section 16(c) of the Finance Act, 1974, allowing the rebate in certain cases despite the notification.

Interpretation of Section 16(c):
The Court emphasized that section 16(c) requires the assessee to have entered into a contract for the machinery before December 1, 1973. As the contract was not made by the assessee-company but by a firm before its existence, the Court held that the assessee was not eligible for the rebate.

Liberal Interpretation:
The Court rejected the argument for a liberal interpretation of section 16(c), stating that the clear language of the provision must be followed. The Court highlighted that principles of interpretation should not distort the enactment's language.

Conclusion:
The Court concluded that the assessee-company was not entitled to development rebate based on section 16(c) of the Finance Act, 1974. The question was answered in the negative, favoring the Revenue. No costs were awarded in this case.