1974 (11) TMI 6 - SC - Income Tax

Whether Tribunal was right in law in holding that the assessee was entitled to claim development rebate on new diesel engines fitted to vehicles - Whether Tribunal was right in holding that development rebate was not allowable on the new diesel engines installed on road transport vehicles - question is answered in the affirmative and in favour of the revenue

Summary

Issues:
- Interpretation of development rebate on new diesel engines in transport vehicles for assessment years 1961-62 and 1962-63.
- Application of section 10(2)(vib) of the Indian Income-tax Act, 1922, and section 33 of the Income-tax Act, 1961.
- Comparison of provisions in Mir Mohammad Ali's case with the current law.

Analysis:

The judgment by the Supreme Court involved two appeals regarding the allowance of development rebate on new diesel engines fitted in transport vehicles for the assessment years 1961-62 and 1962-63. The dispute arose from conflicting decisions by the Tribunal regarding the eligibility of the assessee, a private limited company engaged in the transport business, to claim development rebate on these engines.

For the assessment year 1961-62, the Tribunal allowed the development rebate claim on new diesel engines installed by the assessee, considering them as "machinery installed" under section 10(2)(vib) of the Indian Income-tax Act, 1922. However, for the assessment year 1962-63, the Tribunal rejected a similar claim, stating that when a diesel engine is fitted to a road transport vehicle, it becomes part of the vehicle, and development rebate should be considered for the entire vehicle, not just the engine.

The High Court, basing its decision on the precedent set by the Supreme Court in Commissioner of Income-tax v. Mir Mohammad Ali, ruled in favor of the assessee in both cases. The High Court emphasized that the term "machinery" should be interpreted consistently across different clauses of section 10(2) of the Indian Income-tax Act, 1922.

However, the Supreme Court noted that the provisions of section 10(2) had undergone changes over time. The court highlighted the insertion of clause (vib) and subsequent amendments, which restricted the allowance of development rebate on road transport vehicles. The court analyzed the specific language of the law and concluded that the assessee's claim for development rebate on road transport vehicles for the assessment year 1961-62 was not permissible due to the proviso excluding such vehicles from the rebate.

Regarding the assessment year 1962-63, the claim for development rebate was made under section 33 of the Income-tax Act, 1961, which explicitly excluded road transport vehicles from eligibility. The court emphasized the differences between the provisions of the two Acts and clarified that the High Court erred in favoring the assessee based on the precedent of Mir Mohammad Ali's case.

In conclusion, the Supreme Court allowed both appeals, overturning the decisions of the High Court. The court ruled against the assessee's claims for development rebate on new diesel engines in transport vehicles for the respective assessment years, citing the specific provisions of the Income-tax Acts and the limitations on claiming rebates for road transport vehicles.