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Issues:
1. Entitlement to development rebate for trawlers under section 33(1)(b)(A) of the Income-tax Act, 1961. Analysis: The case involved a private limited company engaged in fishing activities using powered mechanised trawlers. The company claimed a development rebate of 40% on the trawlers for the assessment year 1974-75 under section 33(1)(b)(A) of the Income-tax Act, 1961. The Income-tax Officer initially allowed a rebate of 15% based on a different provision, disallowing the remaining amount. The Appellate Assistant Commissioner, however, accepted the company's argument that trawlers should be considered "ships" under section 33. The Tribunal, on further appeal by the Revenue, analyzed various definitions and interpretations of the term "ship" and concluded that fishing trawlers could not be classified as ships, limiting the development rebate to 15%. The Tribunal's decision was based on the interpretation of the term "ship" in the context of the Income-tax Act, 1961. While the term was not explicitly defined in the Act, the Tribunal considered popular understanding and usage, as well as definitions from other statutes. The Tribunal highlighted that trawlers, primarily used for fishing activities, did not align with the traditional concept of a ship intended for transportation in the high seas. The Tribunal's interpretation was supported by dictionary definitions and the specific function of trawlers in fishing operations. However, the company argued that the term "ship" should be understood broadly, as reflected in Part I of Appendix I to the Income-tax Rules, 1962, which categorized ships for depreciation purposes. Drawing parallels with a previous court decision, the company contended that the classification of vessels in the Rules should guide the interpretation of "ship" under section 33 for development rebate. The Tribunal acknowledged the relevance of the Rules in determining the classification of vessels and agreed with the company's interpretation, granting a development rebate of 40% on the trawlers' cost. In conclusion, the High Court ruled in favor of the company, affirming their entitlement to a development rebate at the rate of 40% for the trawlers. The Court endorsed the broader interpretation of the term "ship" based on the classification in the Income-tax Rules, emphasizing consistency in interpreting the term across relevant provisions. The judgment underscored the importance of contextual interpretation and statutory consistency in determining eligibility for tax benefits, ultimately upholding the company's claim for a higher development rebate percentage.
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