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TMI Blog2006 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... 55(5) of the Income-tax Act, 1961, in with-drawing the development rebate in respect thereof are not applicable in the case of the assessee-company ?" 2. The facts in brief are that the respondent assessee availed of development rebate in respect of certain plant and machinery for the assessment year (AY) 1969-70. At the time of availing of the development rebate, the assessee included cops and bobbins as forming part of the plant and machinery in respect of which the development rebate was claimed. The assessment for 1969-70 was finalised on this basis by an assessment order dated March 8, 1972. The Appellate Assistant Commissioner (AAC) in an order in I. T. A. No. 16/CC-III/72-73, dated January 15, 1973, made certain observations about the assessee having wrongly claimed development rebate. As a consequence, the Assessing Officer sought to reopen the assessment under section 147(a) of the Act. The assessee went in appeal and this time the AAC by an order dated October 11, 1977, held that the notice should have been issued under section 147(b) of the Act and also decided certain other points on the merits. The Appellate Assistant Commissioner also made certain observations abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contention and by an order dated May 30, 1978, passed under section 155(5) of the Act, he withdrew the development rebate on cops and bobbins valued at Rs. 5,94,850 and Rs. 3,60,038 sold during the assessment years 1972-73 and 1973-74 respectively. The development rebate so withdrawn worked out to Rs. 1,18,970 and Rs. 72,005 respectively. The assessee's appeal was dismissed by the Commissioner of Income-tax (Appeals) by an order dated August 25, 1980. The assessee's further appeal before the Income-tax Appellate Tribunal, I. T. A. No. 4033 (Del)/80 was allowed by the Income-tax Appellate Tribunal which followed its earlier order dated January 9, 1981. Thereafter, the Income-tax Appellate Tribunal referred the matter to this court under section 256(1) of the Act for its opinion on the question set out in the first paragraph of this judgment. 5. Ms. Prem Lata Bansal, learned advocate for the applicant submits that the provisions of sections 34(3) read with section 155(5) of the Act are required to be strictly construed. Where the assessee comes forward to declare certain components as comprising the plant and machinery in respect of which development rebate is claimed, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion or treatment ; or" "33. (1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in clause (b)." "34. (3)(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in sub-section (7) of that section being reckoned from the end of the previous year in which the sale or transfer took place or the money was so utilised." 8. Section 155(5) of the Act unambiguously states that if "at any time before the expiry of eight years from the end of the previous year in which the ship was acquired or the machinery or plant was installed, the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government . . . ", then the development rebate originally allowed "shall be deemed to have been wrongly allowed". It is entirely up to the assessee how it chooses to describe plant and machinery in respect of which the assessee wants to claim development rebate. It is quite possible that certain components of the plant and machinery may not be usable for eight years. In that event, if the assessee chooses to include such components as part of the plant and machinery, it runs the risk of being tied down by the condition of non-transferability attached to such components in terms of section 155(5). Further, the assessee stands to lose development rebate only pro rata, i.e., corresponding to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, we do not see how the decision in CIT v. Hardelia Chemical Ltd. [1995] 212 ITR 68 (Bom) can come to the aid of the assessee here. On the other hand we find that in CIT v. Narang Dairy Products [1996] 219 ITR 478, the hon'ble Supreme Court held that even where the plant and machinery had been let out by the assessee the bar under section 34(3)(b) read with section 155(5) would get attracted. It was observed (at ITR page 483) : "It is not only the ownership of the plant or machinery but also its exclusive user by the assessee for the purpose of his business, that is essential to enable the assessee to get the development rebate under section 33(1)(a). In cases where an assessee disables himself from such continued exclusive user of the plant or machinery for the purpose of his business for the specified period, the consequences specified in section 34(3)(b) will follow, provided the machinery or plant is 'otherwise transferred'. It is true that there is no sale ; nor is there any complete extinguishment of the right of the assessee in the machinery or plant by the grant of lease ; but the exclusive possession and enjoyment of the machinery or plant by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal's earlier order was in proceedings relating to the assessment order dated March 8, 1972, while the later order was in the specific context of the separate proceedings under section 155(5) of the Act on the issue of withdrawal of development rebate for the assessment year 1969-70. Fourthly, the Income-tax Appellate Tribunal has in the order dated September 30, 1981, followed its earlier order dated January 8, 1981. The order dated September 30, 1981, has been put in question by the Revenue by seeking the present reference. Therefore, what in effect is also being put to challenge is the earlier order dated January 8, 1981. This argument would have been of some merit had the Revenue let the orders for the assessment years 1969-70 go unchallenged and woken up suddenly a few years later and challenged the order for a subsequent assessment year which followed the earlier order. However, that is not the case here. The challenge is in respect of an order for the very same assessment year 1969-70. For all these reasons, it cannot be said that the Revenue has accepted the earlier order dated January 8, 1981, and is, therefore precluded from preferring the present reference. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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