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PETITIONER: COMMISSIONER OF INCOME-TAX, MADRAS

       Vs.

RESPONDENT: M/S RAMBAL PRIVATE LTD

DATE OF JUDGMENT:       06/08/1997

BENCH: B. N. KIRPAL, K. T. THOMAS

ACT:

HEADNOTE:

JUDGMENT: Present:               Hon’ble Mr. Justice B.N. Kirpal               Hon’ble Mr. Justice K. T. Thomas Ranbir Chandra,  B. Krishna  Prasad and Ms. Lakshmi Iyengar, Advs. for the appellant Ms. Janki Ramachandran, Adv. for the respondents                          O R D E R The following Order of the Court was delivered:                           W I T H       Civil Appeal Nos. 1236 of 1982 and 5637 of 1995                          O R D E R 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 or  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  times not  falling  under  the  Fifth  Schedule, therefore,  the   rate  of   development  rebate  should  be restricted to 20% only.      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.      2.30.840  being  the  cost  of  the      machinery  installed   during   the      relevant previous year, despite the      fact that they were used not merely      for the  manufacture of nuts. bolts

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    and  screws  for  automobiles,  but      also for  the manufacture  of  such      articles for other machinery:.      The High  Court answered  the question of all in favour of the  respondent by observing that the machinery which was installed was used wholly for the purpose of business of the assessee. This  is a  fact  which  had  been  found  by  the Tribunal.  The   High  Court,   further  observed  that  the machinery installed for the purpose of manufacture of one of the  items   mentioned  in   the  Fifth  Schedule  need  not necessarily be used exclusively for the manufacture of those items or  any  of  the  items  in  the  Fifth  Schedule.  It accordingly answered  the question  of law  in favour of the Respondent.      It  is   contended  by  the  learned  Counsel  for  the appellant, in  this appeal  by  special  leave,  it  at  the respondent used  the machinery  for the manufacture of items other than  ’automobile ancillaries’  in addition  to  nuts, bolts and  screws and,  therefor,  the  respondent  was  not entitled to  claim development  rebate at  the rate  of  35% Section 33(1)(a) and (b) with which we are concerned read as follows:      "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 tot the provision of the is      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 up  to use  in the  immediately      succeeding previous  year, then, in      respect of  that previous  year,  a      sum by  way of  development rate as      specified in clause (b).      (b) The  sum referred  to in clause      (a) shall be      (A) In  the case  of a  ship, forty      per cent of the actual cost thereof      the  actual  cost  thereof  to  the      assessee;      (B) in  the case  of  machinery  or      plant-      (i) where the machinery or plant is      installed  for   the  purposes   of      business      of      construction,      manufacture   or production  of any      one or  more  of  the  articles  or      things specified in the list in the      Fifth Schedule-      (a) thirty  five per  cent  of  the      actual cost  of  the  machinery  or      plant; to the assessee, where it is      installed before  the  1st  day  of      April, 1970 and      (b) twenty  five per  cent of  such      cost, where  it is  installed after      the 31st day of March, 19703

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    According to  Section 33(1)  (a) development  rebate is allowable if  the assessee  use the machinery wholly for the purpose of business carried on the him. It is not in dispute that in  the present  case, and  as has  been found  by  the Tribunal, the items which are manufactured by the respondent are wholly for the purpose of his business. Therefor. one of the conditions  stipulated by sub-section 1(a) of Section 33 stands satisfied.      Sub-Clause  [b]  deals  with  the  rate  at  which  the development rebates  is  to  be  allowed.  It,  inter  alia, provides that  in the  case of  machinery or  plant which is installed for  the purposes of manufacturer or production of any one or more of the articles specified in the list in the Fifth Schedule  and that machinery has been installed before 1st day  of April, 1970, then the development rebate will be allowed at  the rate  of 35%  of  the  actual  cost  of  the machinery. In  the instant  case the machinery was installed before 1st day of April, 1970. it cannot be disputed that it was installed  for the purpose of manufacture of nuts, bolts and screws  for automobiles  falling under  item 20  in  the Fifth Schedule  being ‘automobile  ancillaries’. These items were in  fact manufactured. Section 33[1] [b] does not state that  the   machinery  which  has  been  installed  for  the manufacture or  production of  one or  more of  the articles specified in  the Fifth  Schedule should  be used  solely or exclusively  for   the  manufactures  any  of  the  articles specified in  the Fifth  Schedule,  the  assessee  would  be entitled to  claim development  rebate at the rate of 35% if the machinery  is installed  before 1st  day of  April 1970, notwithstanding the fact that in addition to the manufacture of the  listed items,  the assessee  also manufactures  some other  goods  with  the  help  of  that  machinery.  If  the contention of  the department  is accepted, the effect would be that  if the  machinery is used for manufacture of one of the items  listed in  the fifth schedule for few hours a day and lies  idle thereafter  for the  rest  of  the  day,  the assessee would  be entitled  to claim  development rebate at the rate  of 35%  we do not see any logic in this contention and nor  does the  language of  Section 33  warrant  such  a conclusion.      We are in agreement with the decision of the High Court that the machinery, which was being used for the manufacture of some  of the items mentioned in the fifth Schedule, would be entitled  to development rebate at the rate of 35% and it need not  necessarily have  been used  exclusively  for  the manufacture of those items alone.      For the  aforesaid reason,  we hold that the High Court has rightly answered the question of law in the affirmative. This appeal is accordingly dismissed with costs Civil Appeal  Nos. 4003-4004  of 1984  and Civil  No.5637 of 1995      For the  reason referred to in Civil Appeal No. 1286 of 1982, these  appeals are  dismissed and  the decision of the High Court is affirmed. There will be no order as to costs.