1981 (9) TMI 172 - AT - Income Tax

Summary

Issues:
- Determination of the date of entering into a contract for the purchase of an X-ray machine by the assessee.

Analysis:
The main issue in this appeal before the Appellate Tribunal ITAT DELHI-A was to ascertain whether the assessee had entered into a contract for the purchase of an X-ray machine before 1-12-1973 to claim development rebate on the machine. The relevant provisions under the Income-tax Act, 1961 and Finance Act, 1974 were considered in this case. The assessee contended that a contract was indeed entered into before the specified date, while the Income Tax Officer (ITO) and the Appellate Authority held otherwise based on the condition of payment of advance. The crux of the matter revolved around the interpretation of the correspondence between the assessee and the supplier company regarding the X-ray machine purchase.

The correspondence between the assessee and the supplier company, International GEC, played a crucial role in determining the date of entering into the contract. The company's letter dated 26-11-1973 acknowledged the assessee's order for the X-ray machine and mentioned sending a representative for further discussions and to take the advance. The ITO contended that the payment of advance was a pre-condition for confirming the contract and as it was done after 1-12-1973, the assessee was not entitled to development rebate. However, the assessee argued that the payment of advance was not a pre-condition but a subsequent requirement, citing the Supreme Court's decision in Jawaharlal v. Union of India to support his stance.

Upon careful consideration of the submissions, the Tribunal sided with the assessee's interpretation. It was noted that there was no evidence to suggest that the company had imposed a condition of advance payment before booking the order. The Tribunal emphasized that the company's letter dated 26-11-1973, confirming the booking of the order, effectively concluded the contract for the supply of the X-ray machine. Therefore, the contract was deemed to have been finalized on 26-11-1973, which was before the crucial date of 1-12-1973. Consequently, the Tribunal directed the ITO to allow the development rebate on the X-ray machine installed by the assessee, thereby ruling in favor of the assessee.

In conclusion, the Tribunal's decision in this case hinged on the interpretation of the contract formation date based on the correspondence between the parties. By analyzing the sequence of events and the language used in the communications, the Tribunal determined that the contract for the purchase of the X-ray machine was indeed entered into before the specified cut-off date, entitling the assessee to claim the development rebate.