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Section 33 of the Income-tax Act, 1961 - Development rebate - Assessment years 1966-67 and 1967-68 - Because of specific provision cost of assessee's plant and machinery as a whole was allowed by way of deduction but not as revenue expenditure - Whether despite such deduction actual cost of asset remained same for calculating development rebate reserve and, therefore, assessee would be entitled to development rebate on such items of capital assets - Held, yes FACTS Tribunal found that because of a specific provision the entire cost of plant and machinery costing less than Rs. 750 per item was allowed as deducted but it was not allowed as revenue expenditure. It was also found that the assessee had created the requisite development rebate reserve. Thus, the Tribunal concluded that, in view of the clear provisions of section 33(1)(b), development rebate was allowable despite the fact that the entire cost had been allowed by way of deduction. On reference : HELD The fact that the cost had been allowed as a whole by way of deduction but not as a revenue expenditure did not make the actual cost of the asset nil. The actual cost of the asset remained the same for calculating the development rebate reserve. Hence, the Tribunal was right in holding that the assessee was entitled to the development rebate on such items of capital assets. EDITOR'S NOTE 1.In view of decision of the same High Court in Agra Chain Manufacturing Company v. CIT [1978] 114 ITR 140, it was also held that the receipts of money for surrender of import entitlements were revenue in nature and were, therefore, taxable. 2.In view of decision of the same High Court in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.)(FB), it was also held that payments of damages on arrears of provident fund contributions was not allowable as business expenditure. Note : The decision was partly in favour of assessee and partly in favour of revenue. CASES REFERRED TO Agra Chain Mfg. Co. v. CIT [1978] 114 ITR 840 (All.) and Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.) (FB). JUDGMENT Satish Chandra, CJ.-This reference relates to the assessment years 1966-67 and 1967-68. The Tribunal has…

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