1981 (7) TMI 131 - AT - Income Tax

Summary

Issues:
1. Addition made for invisible loss in the production of yarn.
2. Claim for development rebate under section 33 of the Income-tax Act, 1961.

Analysis:
Issue 1: Addition made for invisible loss in the production of yarn
The appeal raised two points, one being the addition made for invisible loss in the production of yarn. The Assessing Officer (AO) noted an invisible loss of 2.18% in the production of cotton yarn by the assessee, which was higher compared to the previous year's loss of 1.18%. The AO added back a sum as undisclosed income due to the excessive loss. However, on appeal, the Commissioner found the higher percentage of invisible loss shown by the assessee reasonable when compared to sister concerns. The Tribunal upheld the Commissioner's decision, stating that the AO lacked material to prove unaccounted production sold outside the books. The Tribunal emphasized the variable nature of invisible loss and the absence of concrete evidence to justify the addition, ultimately confirming the deletion of the addition made by the AO.

Issue 2: Claim for development rebate under section 33
The second point of dispute was the claim for development rebate. The assessee claimed a 25% rebate on machinery acquisitions, but the AO granted differing rates based on a distinction made by the internal audit wing. The Commissioner disagreed with this distinction, asserting that machinery installed for the business purpose, especially for textile production, should be entitled to the higher rate of development rebate. The revenue contended that the higher rate should apply only to machinery directly involved in producing the listed article. However, the Tribunal disagreed, emphasizing that all machinery used for the business purpose of textile production, including generators, should qualify for the higher development rebate. The Tribunal rejected the revenue's arguments, confirming the Commissioner's decision and dismissing the appeal.

In conclusion, the Tribunal upheld the Commissioner's decisions on both issues, dismissing the appeal by the revenue.