1981 (10) TMI 81 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the rectification order under section 154 of the Income-tax Act, 1961.
2. Eligibility for development rebate on cylinders installed after the specified date.
3. Interpretation of the term "installed" in the context of section 16(c) of the Finance Act, 1974.

Issue-wise Detailed Analysis:

1. Validity of the Rectification Order under Section 154:
The revenue appealed against the order of the Commissioner (Appeals) annulling the Income Tax Officer's (ITO) rectification order. The ITO had initially allowed a development rebate but later issued a show cause notice for rectification, citing the inadvertent allowance of the rebate on certain plant and machinery, including cylinders, installed after the permissible date under section 33 of the Income-tax Act, 1961. The ITO argued that the development rebate was mistakenly allowed on cylinders that were installed beyond the cutoff date of 31-5-1975, leading to an excessive rebate of Rs. 2,42,730. The Commissioner (Appeals) annulled this rectification, stating that the mistake was not apparent from the record and required elaborate enquiry and discussion.

2. Eligibility for Development Rebate on Cylinders Installed After the Specified Date:
The assessee contended that the cylinders were ordered in August 1973 and, although received at the factory after 31-5-1975, they were taken delivery of at Bombay docks on 2-5-1975. The assessee argued that the delay in transport due to a strike should not affect the eligibility for the rebate, as the cylinders were effectively installed once they were taken delivery of. The ITO, however, maintained that the rebate was only allowable if the machinery or plant was actually installed before the cutoff date, regardless of when the order was placed or payment made.

3. Interpretation of the Term "Installed":
The Tribunal referred to the Supreme Court's interpretation of the term "installed" in CIT v. Mir Mohammad Ali, which clarified that "installed" means to place an apparatus in position for service or use. The Tribunal concluded that the cylinders could not be considered installed merely by taking delivery at the docks; they needed to be in the factory premises and ready for use. Since the cylinders arrived at the factory only on 10-6-1975 and 12-6-1975, they did not meet the installation requirement before the cutoff date of 31-5-1975.

Conclusion:
The Tribunal found that the ITO had correctly identified a mistake in the original assessment, which was apparent from the record and did not require further enquiry or discussion. The rectification under section 154 was deemed appropriate as the development rebate was wrongly allowed. The Tribunal reversed the order of the Commissioner (Appeals) and restored the ITO's rectification order, thereby withdrawing the excessive development rebate of Rs. 2,42,730. The revenue's appeal was allowed.

Judgment:
The Tribunal allowed the revenue's appeal, reversing the Commissioner (Appeals)'s order and upholding the ITO's rectification order under section 154, thereby withdrawing the development rebate of Rs. 2,42,730.