1968 (1) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to development rebate under section 10(2)(vib) of the Income-tax Act, 1922.
2. Lawfulness of disallowance of development rebate on specific items.
3. Justification of the Tribunal's decision in denying development rebate.
4. Applicability of development rebate to various plants and machinery.

Issue-wise Detailed Analysis:

1. Entitlement to Development Rebate:
The primary issue across the three tax cases is whether the applicants are entitled to development rebate under section 10(2)(vib) of the Income-tax Act, 1922. The applicants, private limited companies dealing in motor vehicles, motor spare parts, and an engineering contractor, claimed development rebate for various plants and machinery purchased during the assessment year 1957-58. The Income-tax Officer initially rejected these claims, but the Appellate Assistant Commissioner allowed the rebate for certain items like electric fans, electric installations, and jeeps. The Tribunal, however, denied the claims, interpreting the word "install" to mean placing in position for service or use, and restricted the rebate to industries deriving income directly from the use of such plant or machinery.

2. Lawfulness of Disallowance:
In Tax Case No. 81 of 1964, the specific issue was whether the disallowance of development rebate on motor cars, typewriters, office appliances, and bicycles amounting to Rs. 10,605 was lawful. The Tribunal's conservative view that the plant or machinery should directly generate income was challenged. The court found this view unwarranted, emphasizing the historical context and legislative intent behind the introduction of section 10(2)(vib), which aimed to encourage industries by allowing a development rebate on all new plant and machinery installed for business purposes.

3. Justification of the Tribunal's Decision:
The Tribunal's decision was scrutinized for its narrow interpretation of the term "install" and its restrictive application of the development rebate. The court highlighted that the historical development of the law and the Finance Minister's budget speech in 1955 indicated a broader intent to provide development rebate to all industries, not just selective ones. The court disagreed with the Tribunal's view that ordinary traders and dealers could not claim the benefit of clause (vib), affirming that the rebate should apply broadly to any plant or machinery used in business.

4. Applicability to Various Plants and Machinery:
The court examined whether specific items like bicycles, motor-cycles, office cars, office appliances, adometers, survey instruments, etc., could be considered for development rebate. It concluded that if items like electric fans, electric installations, and jeeps could qualify, then other business-related apparatus should also be eligible. The court referred to the ordinary meaning of "plant" as defined in Stroud's Judicial Dictionary and supported by the Supreme Court's interpretation in Commissioner of Income-tax v. Mir Mohammad Ali, which includes all apparatus used by a businessman for carrying on his business. Thus, the court held that the applicants were entitled to the development rebate for all the items claimed.

Conclusion:
The court answered all the referred questions in favor of the assessees, affirming their entitlement to the development rebate under section 10(2)(vib) of the Income-tax Act, 1922. The judgment emphasized a broad interpretation of the term "plant" and the legislative intent to encourage industrial growth by providing development rebates on all new plant and machinery used for business purposes. The court allowed only one set of costs for the combined hearing of the tax cases, with an advocate's fee of Rs. 250.