1980 (4) TMI 56 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to higher rebate of tax at 35% for the assessment year 1965-66.
2. Entitlement to deduction u/s 80E for the assessment year 1966-67.
3. Entitlement to development rebate at 35% u/s 33(1)(iii)(c)(A)(a) for the assessment year 1966-67.

Summary:

Issue 1: Higher Rebate of Tax at 35% for AY 1965-66
The primary issue for the assessment year 1965-66 was whether the assessee was entitled to a higher rebate of tax at 35% on its profits and gains attributable to the manufacture or production of automobile ancillaries, including those utilized in its own manufacture of cars, as per Para. F read with items (10) and (21) of Part III of the First Schedule to the Finance Act, 1965. The Tribunal held that the assessee was entitled to the higher rebate, reasoning that it was immaterial whether the ancillaries were sold to outside parties or used internally. The High Court affirmed this view, emphasizing that the term "attributable" has a wider amplitude than "derived from," thus covering receipts from sources other than the actual conduct of the business of the specified industry.

Issue 2: Deduction u/s 80E for AY 1966-67
For the assessment year 1966-67, the issue was whether the assessee was entitled to a deduction u/s 80E in respect of its profits and gains attributable to the manufacture or production of automobile ancillaries, including those used in its own manufacture of cars. The Tribunal ruled in favor of the assessee, and the High Court upheld this decision. The Court noted that the relief under s. 80E was to be given in respect of profits and gains of a priority industry, and the term "attributable" allowed for a broader interpretation, including internal utilization of the ancillaries.

Issue 3: Development Rebate at 35% u/s 33(1)(iii)(c)(A)(a) for AY 1966-67
The final issue for the assessment year 1966-67 was whether the assessee was entitled to a development rebate at 35% on the cost of machineries newly installed for the manufacture of automobile ancillaries, irrespective of whether the ancillaries were sold or used internally. The Tribunal and the High Court both ruled in favor of the assessee. The High Court stated that there was no provision in the Act for disallowing development rebate merely because the machinery was also used for producing goods not entitled to higher rebate of tax.

Conclusion:
The High Court answered all questions in the affirmative and in favor of the assessee for both assessment years 1965-66 and 1966-67. There was no order as to costs.