1982 (2) TMI 96 - AT - Income Tax

Summary

Issues:
1. Interpretation of Fifth and Ninth Schedules for higher development rebate and initial depreciation.
2. Application of legal precedents in determining eligibility for development rebate and depreciation.
3. Discrepancy between different High Courts' interpretations of the relevant schedules.

Analysis:
1. The case involved the interpretation of the Fifth and Ninth Schedules of the Income-tax Act, 1961, to determine the eligibility of the assessee for higher development rebate and initial depreciation. The Commissioner set aside the original assessment, leading to a fresh assessment by the ITO under section 263 of the Act. The Commissioner (Appeals) allowed the higher development rebate and initial depreciation, which was contested by the revenue in appeal.

2. The main contention was whether the assessee fell under item No. 2 of the Fifth Schedule for higher development rebate and item No. 2 of the Ninth Schedule for initial depreciation. Legal representatives argued based on precedents and interpretations of similar cases. The revenue claimed that the assessee did not qualify for these benefits, emphasizing the requirement of being engaged wholly and exclusively in the manufacture of the specific item for higher development rebate.

3. The Tribunal referred to various court decisions, including the Kerala High Court's ruling in CIT v. West India Steel Co. Ltd., which held that certain products like M.S. rods and steel sections were considered 'iron and steel (metal)' for the purposes of the Fifth Schedule. This interpretation was also supported by the Madras High Court and other High Courts, contrary to a decision by the Calcutta High Court. The Tribunal applied these precedents to determine that the assessee indeed fell under the relevant schedules, entitling them to the higher development rebate and initial depreciation.

4. Ultimately, the Tribunal upheld the order of the Commissioner (Appeals), allowing the higher development rebate and initial depreciation to the assessee. The Tribunal's decision was based on the consistent interpretation of the relevant schedules by various High Courts, concluding that the assessee met the criteria for the benefits in question. As a result, the appeal by the revenue was dismissed, affirming the eligibility of the assessee for the higher development rebate and initial depreciation.