1997 (4) TMI 13 - SC - Income Tax

Cold storage and ice plant - claim for development rebate at 35 per cent. as provided under section 33(1)(b)(B)(i)(a) - eligibility of the assessee for grant of development rebate - held that assessee is entitled to grant of development rebate at the rate of 35 per cent.

Summary

Issues:
1. Interpretation of section 33(1)(a) of the Income-tax Act, 1961 regarding eligibility for development rebate.
2. Whether machinery or plant let out temporarily can be considered as "wholly used for the purpose of the business carried on by him" as per the Act.
3. Validity of development rebate granted at the rate of 35 per cent.

Analysis:
The case involved an appeal against the judgment of the Kerala High Court related to the assessment year 1969-70 under the Income-tax Act, 1961. The assessee, a registered firm dealing in sea foods, had set up a freezing, cold storage, and ice plant at their Bombay branch, which was temporarily let out to a sister concern. The issue arose when the assessee claimed development rebate at 35 per cent. under section 33(1)(b)(B)(i)(a) of the Act, but the Income-tax Officer allowed only 20 per cent. development rebate, citing that the plant was let out and not used for processing goods. The Appellate Assistant Commissioner upheld this decision, but the Income-tax Appellate Tribunal ruled in favor of the assessee, granting the rebate at 35 per cent. The Tribunal then referred the question to the High Court regarding the eligibility of the assessee for development rebate on the let-out freezing and storage plant.

The Revenue contended before the High Court that the plant and machinery let out by the assessee could not be considered "wholly used for the purpose of the business carried on by him," a mandatory requirement for development rebate eligibility under section 33(1)(a) of the Act. However, the High Court rejected this contention, emphasizing that the Income-tax Officer had treated the income derived from letting out the plant as business income of the assessee, and the Appellate Assistant Commissioner had confirmed this treatment. The High Court noted that the Department did not challenge the grant of development rebate during the assessment process, and as the orders had become final, it was assumed that the condition of section 33(1)(a) was satisfied. Therefore, the High Court upheld the grant of development rebate at 35 per cent.

During the appeal to the Supreme Court, the senior counsel for the Revenue raised the question of the assessee's eligibility for development rebate based on the conditions of section 33(1)(a). The Court, after considering the arguments and the scope of the question referred by the Tribunal, found no merit in the appeal. The Court dismissed the appeal, stating that the raised contention did not fall within the scope of the referred question. Consequently, no costs were awarded in the case.