1980 (1) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Eligibility for development rebate u/s 33(1) of the I.T. Act, 1961.
2. Interpretation of "used" in the context of machinery for business purposes.

Summary:

1. Eligibility for Development Rebate u/s 33(1):
The primary issue was whether the assessee, a company owning a tea plantation and factory, was entitled to the allowance of development rebate for the assessment year 1971-72. The ITO denied the claim on the grounds that the machinery was installed but not used in the year of account, suggesting the rebate could be allowed in the next year when the machinery was actually used. The AAC reversed this decision, holding that the assessee had fulfilled the requisite conditions for the development rebate. The Tribunal upheld the AAC's decision, concluding that the machinery being kept ready for use amounted to passive user, thus making the allowance admissible.

2. Interpretation of "Used" for Business Purposes:
The court examined the legal interpretation of "used" in the context of machinery for business purposes. The relevant statutory provisions were discussed, including s. 33 of the I.T. Act, 1961, and its historical context under the Indian I.T. Act, 1922. The court referenced several precedents, including CIT v. Viswanath Bhaskar Sathe [1937] and Whittle Anderson Ltd. v. CIT [1971], which supported a broader interpretation of "used" to include passive user. The court concluded that machinery kept ready for use but not used due to extraneous circumstances, such as labour unrest, still qualifies as "used" for the purposes of the business.

The court also addressed the second part of s. 33, which allows for development rebate in the succeeding year if the machinery is first put to use then. However, it was deemed unnecessary to delve into this provision since the first part was satisfied.

Conclusion:
The court affirmed the Tribunal's decision, holding that the assessee was entitled to the development rebate for the assessment year 1971-72. The question referred was answered in the affirmative and in favor of the assessee, with costs awarded to the assessee.