1980 (3) TMI 66 - HC - Income Tax

Summary

Issues: Interpretation of Section 33(1)(b)(B)(i) of the Income-tax Act, 1961 regarding entitlement to higher rate of development rebate on plant and machinery installed for business purposes.

Analysis:
The judgment by the High Court of Calcutta pertains to a reference under section 256(1) of the Income-tax Act, 1961, concerning the assessment year 1971-72. The issue revolved around the entitlement to development rebate under section 33(1)(b)(B)(i) on plant and machinery installed for business purposes. The Income Tax Officer (ITO) initially allowed the development rebate, but the Additional Commissioner disagreed, considering it prejudicial to revenue interests. The Commissioner held that the plant and machinery were not installed for the business of manufacturing jute ropes and twines, leading to a revision of assessment by directing the ITO accordingly.

The assessee contended that the development rebate was justified as the plant and machinery were installed for manufacturing jute ropes and twines. However, the Commissioner rejected this argument, stating that the main business involved producing ropes from materials other than jute or cotton. The Tribunal, upon appeal, found that the plant and machinery were indeed installed for the business of manufacturing jute ropes and twines, leading to the question being referred to the High Court for interpretation.

The crux of the issue lay in interpreting section 33(1)(b)(B)(i) of the Income-tax Act, 1961, which provides for a development rebate on machinery or plant installed for the business of construction, manufacture, or production of specified articles. The revenue's argument, invoking the de minimis principle due to the larger production of ropes from sisal and manilal fibres than jute, was dismissed by the Court. The Court emphasized that the word "wholly" was absent in the relevant clause, and the Tribunal's finding supported the installation of plant and machinery for manufacturing jute ropes and twines, which were included in the Fifth Schedule.

Ultimately, the Court ruled in favor of the assessee, affirming their entitlement to the development rebate under section 33(1)(b)(B)(i) for the plant and machinery installed. The judgment clarified that the volume of production did not impact the eligibility for the rebate under the specified provisions. The Court's decision was unanimous, with both judges concurring on the outcome.