1986 (3) TMI 33 - HC - Income Tax

Summary

Issues:
1. Disallowance under section 37(2B) of the Income-tax Act, 1961 for assessment years 1970-71, 1971-72, and 1972-73.
2. Entitlement to development rebate on a lift installed in a block used for research and development.

Analysis:
1. The first issue pertains to the disallowance under section 37(2B) of the Income-tax Act for specific assessment years. The court relied on a previous decision and ruled in favor of the taxpayer, citing CIT v. Patel Brothers & Co. Ltd. The disallowance was deleted based on the precedent set by the mentioned case.

2. The second issue involves the entitlement to development rebate on a lift installed in a block used for research and development. The taxpayer, a public limited company engaged in manufacturing electrical equipment, claimed development rebate on the lift. The Income-tax Officer initially rejected the claim, arguing that the lift was part of the building and not eligible for rebate. However, the Appellate Assistant Commissioner and the Tribunal disagreed, stating that the lift could be considered as machinery for the purpose of claiming development rebate. The Tribunal applied the test from CIT v. Elecon Engineering Co. Ltd. to support the taxpayer's entitlement to the rebate. The court analyzed the relevant section 33(1)(a) of the Act, which allows for a deduction in respect of new machinery or plant used for business purposes. It concluded that even if the lift was not considered part of the plant, it qualified as new machinery installed by the taxpayer and used for business purposes. Since the lift was a machinery for transporting men and materials, it fell within the scope of section 33(1)(a) and was eligible for development rebate. Therefore, the court upheld the Tribunal's decision and ruled in favor of the taxpayer on the second issue as well.

In conclusion, the court answered both questions in favor of the taxpayer, allowing the development rebate on the lift and rejecting the disallowance under section 37(2B) for the specified assessment years.