1981 (4) TMI 85 - HC - Income Tax

Summary

Issues Involved:
1. Whether the data processing equipment could be regarded as 'office appliances' for the purpose of granting development rebate for the assessment years 1960-61, 1961-62, 1962-63, and 1963-64.
2. Whether the amount equal to 75% of the development rebate, credited to reserve, could be said to have been utilised by the assessee-company for remittance outside India as profits.

Summary:

Issue 1: Data Processing Equipment as 'Office Appliances'
The court considered whether data processing machines could be classified as 'office appliances' for the purpose of granting development rebate u/s 33(1) of the I.T. Act, 1961. Referring to the earlier decision in CIT v. I.B.M. World Trade Corporation, it was held that data processing machines were not office appliances and were eligible for development rebate. Thus, the court answered this question in the negative and against the revenue.

Issue 2: Utilisation of Reserve for Remittance Outside India
The second issue was whether the amount credited to the reserve account was utilised for remittance outside India as profits, which would disqualify the assessee from claiming development rebate u/s 34(3)(a) of the I.T. Act, 1961. The court examined the relevant provisions and found that the reserve account must not be drawn upon for remittance outside India as profits. The court observed that the remittances made by the Indian subsidiary to the assessee-company in the U.K. were not from the reserve account but from rental income. Therefore, the remittances did not attract the prohibition u/s 34(3)(a). The court also noted that the prohibition operates for eight years following the year in which the reserve is credited. Since the remittances were made in the respective accounting years before the reserve account was created, they did not violate the conditions of s. 34(3)(a). Consequently, the court answered this question in the negative and against the revenue.

Conclusion:
Both questions were answered in the negative and against the revenue. The revenue was directed to pay the costs of the reference.