9911796707
TMI Blog1975 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------- Name of Worth Percentage Amount of the machine of rebate of rebate -------------------------------------------------------------- 1. Boring machine 99,407 35% 34,792 2. Turret Lathe 66,300 35% 23,205 3. Turret Lathe 58,613 35% 20,540 -------------------------------------------------------------- The claim of development rebate as regards the last item of Turret Lathe worth Rs. 58,613 was limited to Rs. 15,418 so as to limit the total claim to Rs. 73,415. Since it was apparent that the assessee had not created the reserve sufficient enough to support the claim of development rebate of the uniform rate of 35% on all machines it was submitted in the alternative that the claim of development rebate should be allowed on 5 machines including the above named three machines at different rates as under : Table B ---------------------------------------------------------- Name of machine Worth Rs. Percentage Amount of of rebate rebate ---- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % which is allowed to every new machine purchased or installed in the accounting period. Thus, the Tribunal allowed the assessee's alternative claim with the result that the revenue has preferred this reference. The Tribunal has, therefore,referred the following question for our opinion : " Whether, on the facts and in the circumstances, of the case, the finding of the Tribunal that the assessee was entitled to claim development rebate at 20% of the actual cost of the third, fourth and fifth items of machinery set out in Table B of para. 2 above is contrary to the provisions of section 33(1)(iii)(c)(A)(a) (as it stood prior to amendment from April 1, 1968) read with section 34(3) of the Act ? " In the above question, reference is made to section 33(1)(iii)(c)(A)(a), as it stood before the amendment of 1968, but this clause is in pari materia with the present section 33(1)(b)(B)(i)(a) of the Act. The question which is involved in this reference is whether it is permissible for an assessee to claim development rebate at a lesser rate than what is contemplated by section 33 especially when reserve, which is referable to an item of machinery, with regard to which the developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he category within which it falls, and, hence, if reserve contemplated by section 34(3)(a) is found to be complying with the development rebate, which is so claimed, it is not open to the revenue to reject the said claim of rebate simply because the reserve is not found to be 75% of the development rebate, which is allowable under the category in which the said machine falls. In support of this contention, Shri Shah contended that the allowance of higher rate of development rebate on the machines, which are covered by the 5th Schedule is for the benefit of the assessee, who undertakes the venture of a new industry, which is to be treated on priority basis and, therefore, it would be open to such an assessee to let go the advantage of higher development rebate with regard to any of such machines purchased or installed by it during the relevant accounting period. According to Shri Shah, therefore, the departmental authorities were not correct in rejecting the assessee's claim of development rebate at the rate of 20% on the machines mentioned at Sr. Nos. 3, 4 and 5 of Table B. After considering the scheme of sections 33 and 34 of the Act, which refer to the grant of development reb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned category of the articles falling in the Fifth Schedule is concerned, higher rate of development rebate is contemplated while so far as the latter type of category is concerned, lower rate of development rebate is contemplated. Therefore, it follows that when a particular machinery is found to be falling within a particular category, it is not permissible to place that machine for the purpose of development rebate under the category to which it does not belong. So far as this case is concerned, the assessee has admitted by its revised return that all the five machines, which are mentioned in Table B are falling in the category of articles and things specified in the Fifth Schedule and are, therefore, entitled to the enhanced development rebate of 35%. If that be so, none of these can be carried to the general category which contemplates the machines purchased or used " for the purpose of any other business " and therefore, all the five machines mentioned in Table B should be considered as covered only by the category which earns the higher rebate at the rate of 35%. Now, the grant of development rebate under section 33 is governed by the provisions contained in section 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an admitted fact that this amount of Rs, 73,415 does not permit the assessee to earn the development rebate at the uniform rate of 35% on all the five machines mentioned in Table B. The claim of the assessee is that even if the uniform rate of 35% is not available to it on all the five machines, it should be allowed rebate at a lesser rate on the last three items of the machines mentioned in Table B, because the assessee is willing to forgo the advantage of the higher rate of development rebate contemplated for the articles and things mentioned in the Fifth Schedule. This contention of the assessee is not permissible, because if once it is found that a particular machine falls within a particular category for the purpose of earning development rebate, an assessee cannot earn any rebate on that machine if he has not complied with the condition precedent of creating a reserve of an amount equal to 75% of the development rebate which is to be actually allowed to him. Sub-section 3(a) of section 34 specifically provides for the creation of a reserve which has reference to the rebate which is " to be actually allowed ". Therefore, the pertinent question is what is the rebate " to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that, recently, in Additional Commissioner of Income-tax v. Shri Subhlaxmi Mills Ltd. this court has held that before any development rebate can be allowed as a deduction, the conditions laid down in section 34 of the Income-tax Act, 1961, must be satisfied. It is further observed that these requirements of section 34 are not mere idle formalities and must be met first, and only then the rebate can be allowed. During the course of this decision, this court has agreed with the following observations of the Madras High Court in Commissioner of Income-tax v. Veeraswami Nainar : " It will follow that in order that an assessee can claim an allowance by way of development rebate under section 10(2)(vib) he should comply with the conditions contained in the proviso thereto as otherwise, under the express terms of that proviso, he would not be entitled to the allowance. Where he fails to satisfy the conditions requisite for obtaining the allowance, it will not be for the court to embark upon what the general object of the exemption was, and whether the conditions imposed were of a theoretical or technical nature, which, in the interests of justice, should be, dispensed with. We ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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