1997 (8) TMI 2 - SC - Income Tax

Machinery used not merely for the manufacture of nuts, bolts and screws for automobiles, but also for the manufacture of such articles for other machinery - machinery is mentioned in the Fifth Schedule - hence impugned machinery will get development rebate at the rate of 35 per cent, even if not used exclusively in mfg. of nuts, bolts and screws for automobiles

Summary

Issues:
Interpretation of Section 33(1)(a) and (b) for development rebate on machinery used for manufacturing items falling under Fifth Schedule.

Analysis:
In Civil Appeal No. 1286 of 1982, the case revolved around the assessee-respondent claiming development rebate for machinery used in manufacturing nuts, bolts, and screws for automobiles falling under the Fifth Schedule. The Income-tax Officer restricted the rebate to 20% as the machinery was also used for manufacturing other items. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal ruled in favor of the respondent, emphasizing that the machinery was wholly used for the business. The High Court concurred, stating that the machinery need not be exclusively used for Fifth Schedule items to qualify for the rebate. The Supreme Court upheld this decision, noting that Section 33(1)(a) requires the machinery to be wholly used for the business, which was satisfied in this case. Section 33(1)(b) specifies the rate of rebate, allowing 35% for machinery installed before April 1, 1970, for manufacturing Fifth Schedule items, without requiring exclusive use for those items.

In Civil Appeal No. 4003-4004 of 1984 and Civil Appeal No. 5637 of 1995, the Supreme Court dismissed the appeals based on the reasoning in Civil Appeal No. 1286 of 1982. The High Court's decision was affirmed, emphasizing that the machinery's exclusive use for Fifth Schedule items was not a prerequisite for claiming the development rebate at the specified rate. The Court maintained that as long as the machinery was used for manufacturing any items listed in the Fifth Schedule, the assessee was entitled to the rebate, irrespective of other items produced using the same machinery. The judgments underscored that the language of Section 33 did not mandate exclusive use for listed items to qualify for the development rebate.