IMPORTANT POINT
The condition for grant of development rebate u/s 33 r/ws 34(3)(a) of the Income Tax Act, 1961 would not be satisfied if the assessee who has availed the rebate ceases to exist before the expiry of the period of eight years.

Headnote:TAXATION-Income Tax Act, 1961 -Sections 33(1)(a), 34-Development Rebate-Condition for grant of rebate under Section 33 r/ws 34(3)(a)-Assessee who has obtained development rebate u/s 33(1)(a) must also be assessee who should utilise the amount credited to Reserve Account-Expression by the assessee refer to same assessee-Condition for grant of rebate would not be satisfied if assessee who has availed rebate ceases to exist before expiry of period of eight years-Where assessee firm had ceased to exist as a result of dissolution before expiry of period of eight years-High Court rightly held that appellant assessee could not avail the benefit of development rebate. (Paras 9 & 10)
(ii) Income Tax Act, 1961-Sections 155 and 263-Power of rectification conferred on Income Tax Officer u/s 155-Power of revision conferred on Commissioner u/s 263-Distinct powers-Revisional power u/s 263 is of wide amplitude-It enables Commissioner to revise an order passed by Assessing Officer if he considers it to be erroneous. (Para 11)

JUDGMENT

These appeals, by certificate granted under Section 261 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), have been filed by the assessee against the judgment of the Madras High Court dated November 2, 1981. By the said judgment the High Court has answered the following question referred to it by the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) against the assessee and in favour of the Revenue :

"Whether on the facts and circumstances of the case the revision of assessment under Section 263 by the Commissioner for withdrawing the development rebate granted for assessment years 1962-63, 1963-64, 1967-68 and 1968-69 is proper and justified."

2. The assessee was a partnership firm having been constituted on September 1, 1960. It was running a steel rolling mill. Initially, there were four partners, namely, M/s. S.L. Nahata, M.S. Bedi, Biharilal and M.K. Raheja, in the assessee firm. Two of the partners, Biharilal and M.K. Raheja, subsequently retired from the partnership and the partnership was reconstituted with the remaining two partners continuing the same business. On March 3, 1968, Shri M.S. Bedi one of the two partners died. Since only one surviving partner was left the partnership stood dissolved. On March 4, 1968 a new partnership was constituted comprising of Shri S.L. Nahata and the legal heirs of Shri M.S. Bedi to carry on the business undertaking previously carried on by the partnership firm of which Shri M.S. Bedi was a partner.

3. In these appeals we are concerned with the partnership firm as it existed prior to its dissolution on March 3, 1968. The assessee firm had obtained the benefit of Development Rebate under Section 33(1)(a) of the Act during the assessment years in question. Since the partnership stood dissolved on March 3, 1968, before the expiry of the period of 8 years, the Commissioner of Income Tax, in exercise of the powers conferred on him under Section 263 of the Act withdrew the Development Rebate that had been granted to the assessee for the said assessment years. Feeling aggrieved by the said order of the Commissioner, the assessee filed an appeal before the Tribunal which was decided against the assessee. At the instance of the assessee the Tribunal referred the question abovementioned for the opinion of the High Court.

4. The question raised involves interpretation of the provisions of Sections 33(1)(a) and 34(3) which at the relevant time read as under :

"Development Rebate

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);"

"Conditions for depreciation allowance and development rebate

34(3)(a). The deduction referred to in Section 33 shall not be allowed unless an amount equal to seventy five per cent of the Development Rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business undertaking, other than-

(i) for distribution by way of dividends or profits; or

(ii) for remittance outside India as profits or for the creation of any asset outside India;

Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 [54 of 1948], or where the ship has been ac

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1997 Supreme(SC) 364

IMPORTANT POINTThe condition for grant of development rebate u/s 33 r/ws 34(3)(a) of the Income Tax Act, 1961 would not be satisfied if the assessee who has availed the rebate ceases to exist before the expiry of the period of eight years.

Cases Referred (2)

IMPORTANT POINT
The condition for grant of development rebate u/s 33 r/ws 34(3)(a) of the Income Tax Act, 1961 would not be satisfied if the assessee who has availed the rebate ceases to exist before the expiry of the period of eight years.