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Issues Involved:
1. Whether the Tribunal was justified in holding that the development rebate originally granted for the assessment year 1966-67 in relation to the trawler 'Sea Queen' was liable to be withdrawn. 2. Whether the Tribunal was justified in holding that the income for the assessment year 1967-68 would, as a consequence of the decision for the assessment year 1966-67, fall to be recomputed. Summary: Issue 1: Withdrawal of Development Rebate The assessee, a company engaged in fishing, purchased a trawler named "Sea Queen" and was granted a development rebate for the assessment year 1966-67. The Income-tax Officer initiated proceedings u/s 155(5) read with section 34(3)(b) of the Income-tax Act, 1961, to withdraw the rebate on the grounds that the trawler was sold within eight years from the end of the previous year in which it was acquired. The officer considered the sale date as October 28, 1972, based on an agreement (annexure D) with Shaparia Dock & Steel Co. P. Ltd., Bombay, rather than the actual sale completion date of March 29, 1974. The Appellate Assistant Commissioner accepted the assessee's contention that the sale took place outside the eight-year period as per the Merchant Shipping Act. However, the Tribunal found that there was a transfer or extinguishment of the right or interest of the assessee within the eight-year period, thus attracting the provisions of sections 34(3)(b) and 155(5). Issue 2: Recomputing Income for Assessment Year 1967-68 As a consequence of the decision for the assessment year 1966-67, the Income-tax Officer recomputed the assessee's income for the assessment year 1967-68 by rectification u/s 154. The Tribunal upheld this recomputation. Legal Reasoning: The court examined sections 33, 34(3)(b), and 155(5) of the Income-tax Act, 1961, which stipulate that if a ship is sold or otherwise transferred within eight years, the development rebate is deemed to have been wrongly allowed. The court referred to the Supreme Court's interpretation of "transfer" in Alapati Venkataramiah v. CIT, emphasizing that "transfer" implies effective conveyance of the asset. The court noted that the definition of "transfer" u/s 2(47) of the present Act is inclusive and broad, covering sale, exchange, relinquishment, extinguishment, or compulsory acquisition. The agreement (annexure D) indicated that the trawler was leased with an eventual sale, transferring exclusive possession and enjoyment to the transferee within the eight-year period. This constituted a transfer of a right or interest in the trawler, falling within the scope of "otherwise transferred" as per sections 34(3)(b) and 155(5). Conclusion: The court answered both questions in the affirmative, in favor of the Revenue and against the assessee, holding that the development rebate was rightly withdrawn and the income for the assessment year 1967-68 was correctly recomputed. The parties were directed to bear their respective costs.
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