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TMI Blog1980 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... brought into use. The assessee appealed to the AAC, who held that the assessee had fulfilled the requisite conditions prescribed for the development rebate and he, therefore, directed the ITO to allow it. The ITO appealed to the Tribunal. The Tribunal after considering the facts, came to the conclusion that when the machinery was kept ready for use and could not be used in the relevant accounting year, because of extraneous circumstances, then it would amount to passive user and, under the law, the allowance would be admissible to the assessee. The Commissioner of Income-tax has questioned this conclusion of the Tribunal in the form of the question extracted already. Before proceeding to consider the question in its legal aspect we would extract certain passages from the directors' report accompanying the statement of accounts for the years ended 31st March, 1971, and 31st March, 1972. In the directors' report for the year ended 31st March, 1971, the following passage occurs: New Tea Factory : The board of directors have pleasure to report that the new tea factory building was completed during the season, and the erection of all the new tea machinery (purchased on hire purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) ............" This section imposes two conditions for the allowance: one is that the machinery must be new and owned by the assessee and the other is that it must be wholly used for the purpose of the business carried on by the assessee. There is no dispute in the present case, that the machinery is new and that it is owned by the assessee. Mrs. Nalini Chidambaram, the learned counsel who argued the case on behalf of the Commissioner, contended that the actual user of the machinery for the purpose of business carried on by the assessee was only in the year next to the year in question and that, therefore, the assessee has not satisfied the twin conditions laid down in s. 33. Mr. Chidambaram, the learned counsel for the assessee, contended that he has satisfied the second condition also as the machinery was kept ready for use and it could not be used o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployed in the work of ginning in accordance with the pooling agreement though he received a share of the profits, presumably under the arrangement with the pool. The assessee claimed depreciation under s. 10(2)(vi) and the question was whether the assessee had " used " the machinery during the relevant year. The contention urged on behalf of the Commissioner was, that the word "used " would refer only to the actual working of the machinery. Beaumont C.J. pointed out at page 625 : " But I think that the word 'used' in this section may be given wider meaning and embraces passive as well as active user. Machinery which is kept idle may well depreciate, particularly during the monsoon season. It seems to me that the ultimate test is, whether, without the particular user of the machinery relied upon, the profits sought to be taxed could have been made and as I read the agreement in the case, the profits of the assessee during the year under assessment could not have been earned except by his maintaining his factory in good working order, and that involves the user of the factory and the machinery." This view has been followed in all later cases. In Whittle Anderson Ltd. v. CIT [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are called the " pool cases ". It would be necessary, however, to bear in mind that the statutory expression cannot vary in its meaning and content with the cases belonging to the pooling category and with others. The expression would have to be construed in a uniform sense so as to be applicable to all cases. There appears to have been cases where a different view was taken as pointed out by the Supreme Court and these cases are noticed in CIT v. Jiwaji Rao Sugar Co. Ltd. [1969] 71 ITR 319 (MP), which is printed as an Appendix to the decision in CIT v. Dr. Fida Hussain G. Abbasi [1969] 71 ITR 314 (MP). We consider that the view taken by the Bombay High Court in CIT v. Vishwanath Bhaskar Sathe [1937] 5 ITR 621 and the cases following it, is the more appropriate view to take on the construction of the provision. The above passage from the judgment of the Supreme Court was referred to before the Bombay High Court in Whittle Anderson Ltd. v. CIT [1971] 79 ITR 613. The learned judge pointed out at page 629: " Now profits can be earned and business can be carried on as much by using one's machinery as by allowing it to remain unused pursuant to an agreement so long as the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n another year, the second part of s. 33 has been brought into operation. It is not necessary for us to express any opinion as to whether this part of the provision applies only to those cases where a new business is set up and in setting up the machinery is installed in one year and used in another. So long as the first part of the provision is satisfied in the present case, we consider that the assessee would be eligible for the grant of development rebate and it is unnecessary for us to go into the second part and whether the assessee is eligible for the development rebate next year on the view that the assessee had brought into use the machinery in the next year. The second part of the provision is an additional concession and is not to be understood as if it cuts down or restricts the first part. In view of the finding in the present case that the machinery was kept ready for use in that year and could have been used but for the strike, we are satisfied that the assessee is eligible for the development rebate. The result is, the question referred to us is answered in the affirmative and in favour of the assessee. The assessee will be entitled to its costs. Counsel fee Rs. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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