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TMI Blog1986 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... b)(B)(i) and 80-I of the Income-tax Act, 1961, for the assessment years 1968-69 to 1971-72. Section 33 of the Income-tax Act, 1961, provides for the grant of development rebate. Prior to April 1, 1968, section 33(1)(iii)(c)(A) of the Income-tax Act, 1961, provided: "(1) In respect of a new ship acquired or new machinery or plant (other than office appliances or road transport vehicles) installed after the 31st day of March, 1954, which is owned by the assessee and is wholly used for the purposes of the business carried on by him, a sum by way of development rebate, equivalent to-... (iii) in the case of machinery or plant installed after the 31st day of March, 1961-... (c) where the machinery or plant is installed after the 31st day of March, 1965, (A) for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, (a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent. of such cost, where it is installed after the 31st day of March, 1970.... shall, subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80E was deleted with effect from April 1, 1968, and was substituted by section 80-I which provides: " 80-I. (1) In the case of a company to which this section applies, where the gross total income includes any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. " It is not disputed between the parties that the assessee is a company to which the provisions of section 80E and subsequently of section 80-I will apply. Section 80-I, it may be noted, was deleted by the Finance Act, 1972, with effect from April 1, 1973. With effect from April 1, 1968, the expression " priority industry " was defined in section 80B(7) as meaning: " the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-72. It produced expert evidence in support of its claim. The Income-tax Officer rejected the claim made by the assessee. An appeal to the Appellate Assistant Commissioner was dismissed. The assessee then appealed to the Income-tax Appellate Tribunal. The Appellate Tribunal allowed the six appeals and held that the assessee was entitled to the benefits claimed by it as a " priority industry". It noted that although the assessee had based its claim on items Nos. 7, 17 and 24 of the Schedules, the claim was emphatically pressed in the hearing before it under item No. 7 alone. The question before it then was limited to the point whether the wires manufactured by the assessee fell within item No. 7. In disposing of the appeals, the Appellate Tribunal adverted to its finding in the appeals for the two immediately preceding assessment years 1964-65 and 1965-66. In its appellate order for the assessment year 1964-65, it found that the assessee manufactured aluminium cables which were used in the transmission of electricity and held that, therefore, it was entitled to the benefit of the Fifth Schedule relevant for those two assessment years. In the appeal pertaining to the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee do not fall within the scope of item No. 7. It is urged also that the true test for determining whether the cables could be used in the generation and transmission of electricity was that laid down by the Madras High Court in CIT v. Dhandayuthapani Foundry (P.) Ltd. [1980] 123 ITR 709, wherein considering the question whether an implement could be described as an agricultural implement, it was observed that the real test was not whether it was exclusively used for agricultural purposes but whether it was commonly so used and whether it was intimately and directly connected with agricultural operations. The point before us is whether the cables manufactured by the assessee qualify for inclusion in item No. 7 of the Fifth Schedule or the Sixth Schedule, as the case may be, having regard to the relevant assessment year. Item No. 7 speaks of equipment for the generation and transmission of electricity and such equipment includes transformers, cables and transmission towers. To appreciate what is comprehended in item No. 7, it is permissible to refer to a related entry, item No. 24, which refers to component parts of the articles mentioned, inter alia, in item No. 7. When item N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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