1981 (9) TMI 58 - HC - Income Tax

Issues Involved:
1. Entitlement to deduction under section 80E for assessment years 1966-67 and 1967-68.
2. Entitlement to a higher rate of development rebate under section 33(1)(iii)(c)(A)(a) for assessment years 1966-67 and 1967-68.
3. Entitlement to deduction under section 80-I for assessment years 1968-69 and 1969-70.
4. Entitlement to a higher rate of development rebate under section 33(1)(b)(B)(i)(a) for assessment years 1968-69 and 1969-70.

Detailed Analysis:

Issue 1: Entitlement to Deduction under Section 80E for Assessment Years 1966-67 and 1967-68
The Tribunal had allowed the assessee-company a deduction under section 80E of the Income-tax Act, 1961, for the assessment years 1966-67 and 1967-68. The assessee argued that the electrical accessories it manufactured, such as switches, sockets, and lamp holders, were used for the transmission of electricity. The Commissioner, however, contended that these articles were used for the consumption of electricity rather than its transmission, and thus, the deduction was not justified. The High Court concluded that the articles manufactured by the assessee were ordinary electrical accessories used mainly for controlling the flow of electricity in its consumption at the ultimate end and not for the transmission of electricity. Therefore, the Tribunal's decision was overturned, and the deduction under section 80E was denied.

Issue 2: Entitlement to a Higher Rate of Development Rebate under Section 33(1)(iii)(c)(A)(a) for Assessment Years 1966-67 and 1967-68
For the same assessment years, the Tribunal had allowed a higher rate of development rebate at 35% under section 33(1)(iii)(c)(A)(a). The Commissioner argued that the articles manufactured by the assessee did not fall within the category of equipment for the transmission of electricity as specified in item No. 7 of Schedule V. The High Court agreed with the Commissioner, stating that the articles manufactured by the assessee could not be considered as equipment for the transmission of electricity. Consequently, the higher rate of development rebate was also denied.

Issue 3: Entitlement to Deduction under Section 80-I for Assessment Years 1968-69 and 1969-70
The Tribunal had allowed the assessee-company a deduction under section 80-I for the assessment years 1968-69 and 1969-70. The Commissioner contended that the articles manufactured by the assessee were not equipment for the transmission of electricity and, therefore, did not qualify for the deduction. The High Court held that the articles manufactured by the assessee were ordinary electrical accessories and could not be classified as equipment for the transmission of electricity. Thus, the deduction under section 80-I was denied.

Issue 4: Entitlement to a Higher Rate of Development Rebate under Section 33(1)(b)(B)(i)(a) for Assessment Years 1968-69 and 1969-70
For the assessment years 1968-69 and 1969-70, the Tribunal had allowed a higher rate of development rebate under section 33(1)(b)(B)(i)(a). The Commissioner argued that the articles manufactured by the assessee did not qualify as equipment for the transmission of electricity. The High Court agreed, stating that the articles were ordinary electrical accessories and did not fall within the category specified in item No. 7 of Schedule V. Therefore, the higher rate of development rebate was denied.

Conclusion:
The High Court concluded that the articles manufactured by the assessee-company did not qualify as equipment for the transmission of electricity. Therefore, the Tribunal's orders granting deductions under sections 80E and 80-I and allowing a higher rate of development rebate under section 33 were overturned. The questions were answered in the negative and against the assessee for all the assessment years involved. The assessee was ordered to pay the costs of the reference.

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