The assessee is entitled to the higher rate of development rebate under Section 33 (1) (b) (B) (i) of the Income-tax Act, 1961, on the plant and machinery installed for manufacturing and producing jute ropes and jute twines.

( 1 ) THIS is a reference under Section 256 (1) of the I. T. Act, 1961. The assessment year is 1971-72. The relevant accounting year ended on 30th of June, 1970.

( 2 ) THE ITO allowed the development rebate under Clause (B) (i) of Section 33 (1) (b) of the I. T. Act, 1961, on plant and machinery which were installed and used by the assessee in the accounting year relevant to the assessment year under reference.

( 3 ) THE Addl. Commissioner was of opinion that the development rebate was erroneously allowed and it was also prejudicial to the interests of the revenue. He, therefore, gave an opportunity to the assessee of being heard.

( 4 ) THE assessee contended that the ITO was justified in allowing the development rebate as the plant and machinery were installed by the assessee for the purposes of manufacturing and producing jute ropes and jute twines.

( 5 ) THE Commissioner rejected the argument with a finding that the plant and machinery could not be regarded as installed for the purposes of business of manufacture or production of jute ropes and jute twines as the main business of the assessee was production of ropes from materials other than jute or cotton. He also held that the plant and machinery in question must be looked upon as having been installed for the purpose of manufacture or production of ropes made of sisal and manilal fibres and not for production of jute ropes though some jute ropes were produced with the help of the same plant and machinery. He, therefore, held that the assessee was not entitled to the higher development rebate under Section 33 (1) (b) (B) (i) in respect of plant and machinery costing Rs. 1,27,760 installed in the previous year for 1971-72 assessment and Rs. 1,18,651 installed in the previous year for 1970-71 assessment, and development rebate in respect of these items of plant and machinery should be allowed Under the provisions of Section 33 (1) (b) (B) (i), i. e. , at the rate of 20% of the cost when the installation was before April 1, 1970, and at 15% when the installation was after March 31, 1970.

( 6 ) HE, accordingly, directed the ITO to revise the assessment.

( 7 ) THE assessee filed an appeal before the Tribunal. The Tribunal found that the assessee had installed the plant and the machinery for the purposes of the business of manufacture and production of jute ropes and jute twines although the assessee has manufactured and produced larger quantities of ropes made of sisal and manilal fibres than the ropes and twines made of jute. The Tribunal, therefore, allowed the appeal.

( 8 ) AT the instance of the revenue, the following question has been sent by the Tribunal to this court. " Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 33 (1) (b) (B) (i) of the Income-tax Act, 1961, read with items 32 and 33 of the Fifth Schedule to the said Act, the assessee would be entitled to higher rate of development rebate on the plant and machinery installed by it during the accounting year relevant to the assessment year under reference ? "

( 9 ) THE relevant provisions of Section 33 of the I. T. Act, 1961, read thus 1 " 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 ). (b) The sum referred to in Clause (a) shall be- -. . . (B) in the case of machinery or plant,-- (i) where the machinery or plant is installed for the purposes of business