ORDER

Civil Appeal No.1286 of 1982

The assessee-respondent manufacturers nuts, bolts and screws for automobiles which fall under Item No. 20 in the Fifth Schedule being automobile ancillaries . According to the appellant the machinery which was installed was being used not only for the manufacture of items falling in the Fifth Schedule but also for the manufacture of some other items. Whereas the respondent had claimed allowance on development rebate in respect of assessment year 1969-70 at the rate of 35%, the Income-tax Officer held that inasmuch as the machinery was also being used for the manufacture of some other items not falling under the Fifth Schedule, therefore, the rate of development rebate should be restricted to 20% only.

2. Being aggrieved the respondent succeeded in the appeal filed before the Appellate Assistant Commissioner. The department filed an appeal to the Income Tax Appellate Tribunal which, however, upheld the assessee s contention. At the instance of the department the Tribunal referred the following question of law to the High Court.

Whether, in the assessment for the assessment year 1969-70, the assessee could be allowed development rebate at 35% on Rs. 2