Law:

Section:

Section 33 of the Income-tax Act, 1961 - Development rebate - Assessment year 1971-72 - Whether where machinery was kept ready for use but could not be used in relevant accounting year because of frequent labour unrest, assessee, in such a situation, would be eligible for development rebate - Held, yes FACTS The Income-tax Officer rejected the claim of the assessee-company for development rebate, on the ground that the machinery in respect of which this claim had been made, was only installed and had not been used in the year of account and that the amount would be allowed as a deduction in the next year when the machinery was actually brought into use. The AAC, held that the assessee had fulfilled the requisite conditions prescribed for the development rebate and he, therefore, directed the Income-tax Officer to allow it. The Tribunal affirmed the view taken by the AAC holding that when the machinery was kept ready for use and could not be used in the relevant accounting year, because of extraneous circumstances, then it would amount to passive user and, under the law, the allowance would be admissible to the assessee. On reference : HELD From the director's report, it would be clear that the assessee had completed the construction of the building and the installation of the machinery before 31-3-1971, which was the year under consideration. The assessee could not start regular manufacture with the aid of this machinery because of frequent labour unrest. Section 33 imposes two conditions for the allowance ; one is that the machinery must be new and owned by the assessee and the other is that it must be wholly used for the purpose of the business carried on by the assessee. The machinery could be "used" for the purposes of the business so long as it is kept ready for such user. Any "forced idleness" of the machinery cannot disentitle the assessees from getting the benefit of the allowance. In the instant case, from the director's report, it was clear that the assessee was prevented from using the machinery because of the frequent labour unrest. In these circumstances, the assessee would be eligible for the allowance as the machinery was kept ready for use and…

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