1992 (12) TMI 65 - AT - Income Tax

Summary

Issues:
- Claim of development rebate under section 33 of the Income-tax Act, 1961
- Jurisdiction of Commissioner under section 263 to revise assessments
- Interpretation of section 33(1)(b)(B)(i) regarding entitlement to higher development rebate

Analysis:

The judgment involves appeals related to the claim of development rebate under section 33 of the Income-tax Act, 1961 for the assessment years 1973-74 and 1974-75. The assessee, a company deriving income from selling and leasing out computers, had claimed a development rebate at 25% on the Computer Systems leased out. The Income Tax Officer (ITO) initially denied the claim, considering the Computer Systems as mere office appliances. However, the Commissioner (Appeals) overturned this decision, directing the ITO to grant the development rebate. The Tribunal also upheld the Commissioner's decision. Subsequently, the Commissioner, under section 263, proposed to revise the assessment, contending that the development rebate at 25% was wrongly allowed, suggesting it should be 15% instead.

Regarding the jurisdiction of the Commissioner under section 263, the assessee argued that the Commissioner's order was beyond his authority as the matter had already been subject to appeal before the Commissioner (Appeals) and the Tribunal. The assessee further contended that there was no error in the ITO's order, emphasizing that the assets were used for producing articles specified in the Fifth Schedule, entitling them to the higher development rebate. The department's representative supported the Commissioner's order, asserting that ownership of the asset and the business where it was used were essential for the higher development rebate.

The Tribunal rejected the first contention of the assessee, stating that the order giving effect to the appellate order remained independent and not subject to the doctrine of merger. However, the Tribunal agreed with the second contention raised by the assessee on merits. Analyzing section 33, the Tribunal emphasized that ownership of the asset and its use for the business were prerequisites for any development rebate. It concluded that the higher development rebate did not necessitate the assessee to own the business producing the specified articles, as long as the asset was used for their production. Therefore, the order granting the higher development rebate at 25% was deemed correct, and the Commissioner's order under section 263 was canceled. Consequently, the appeals were allowed in favor of the assessee.