The ruling clarifies that development rebate under Section 33(6) is not restricted to machinery installed in premises owned or occupied by the assessee, allowing rebates on meters regardless of their location.

1. By this reference under S.256(1) of the Income - tax Act , 1961 ("the Act"), the Income - tax Appellate Tribunal has referred the following question of law to this court for opinion at the instance of the Revenue:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the claim of development rebate on the cost of meters installed by the assessee - company at the residential or office premises of its consumers, was not at variance with the provisions of S.33(6) of the Act?"

2. The assessee is an electric supply undertaking and its business is to supply electrical energy to its consumers. For the assessment year 1974-75, the Income - tax Officer determined the development rebate admissible to the assessee at Rs. 8,01,917 and allowed Rs. 5,59,744 against the total income available for the purpose. The development rebate determined by the Income - tax Officer included a sum of Rs. 61,155 relatable to the cost of meters installed by the assessee - company at the residential or office premises of its consumers. However, the order of the Income - tax Officer was revised by the Commissioner of Income - tax ("the Commissioner") under S.263 of the Act, as the Commissioner was of the opinion that the development rebate on the cost of meters installed by the assessee - company at the residential or office premises of the consumers had been erroneously allowed by the Income - tax Officer in violation of the provisions of S.33(6) of the Act. After issuing a show - cause notice to the assessee and on hearing the assessee's representative, the Commissioner directed the Income - tax Officer to withdraw the development rebate in respect of the cost of meters in question, as the meters were installed in the residential and office premises, of the consumers. The assessee took the matter in appeal before the Tribunal. Before the Tribunal, it was contended on behalf of the assessee that S.33(6) of the Act was applicable only in case of machinery and plant such as air - conditioners and other machinery installed by the assessee in its own office premises or residential accommodation or guest houses. This contention of the assessee was accepted by the Tribunal. The Tribunal held that the office premises or residential accommodation including the guest house referred to in sub-section (6) of S.33 relates to the office premises or residential accommodation including the guest house of the assessee concerned, i.e., either belonging to the assessee or in its occupation on lease or licence, etc., and the restrictions contained therein do not apply to machinery and plant installed in the office premises or residential accommodation of persons other than the assessee itself. In that view of the matter, the Tribunal cancelled the order of the Commissioner and restored the order of the Income - tax Officer. Aggrieved by the order of the Tribunal, the Commissioner of Income - tax applied for a reference of the question of law arising out of the order of the Tribunal to this court and the Income - tax Appellate Tribunal, on being satisfied that a question of law did arise, has referred the question set out above under S.256(1) of the Act to this court.

3. Learned counsel for the Revenue submitted before us that the whole approach of the Tribunal to the issue was erroneous. The Tribunal, according to counsel, while reading S.33(6) of the Act had added thereto the words "belonging to it" to restrict the application thereof only to the machinery and plant installed in the office premises or residential accommodation including any accommodation in the nature of guest house belonging to the assessee or in the occupation of the assessee whereas the section does not contain any such limitation. Counsel for the Revenue, therefore, submitted that the order of the Tribunal cannot be sustained on that ground itself. The further submission of counsel for the Revenue was that on a plain reading of S.33(6) of the Act, it