Law:

Section:

Section 33(1)(b)(B)(i), read with entry 1 in the fifth schedule, of the income-tax act, 1961-Development rebate-Allowance of-Assesses purchased special steel from market and subjected it to heat process to produce wire therefrom which it marketed-Whether it was eligible for development rebate at higher rate under section 33(1)(b)(B)(i)-Held, on facts, no Facts The assessee used to buy billets of special steel from the market and subject these to a process of heat to manufacture wire therefrom which it marketed as its end product. It claimed development rebate at a higher rate under section 33(1)(b)(B)(i) read with entry 1 in the Fifth Schedule which allowed such higher development rebate to the manufacturers of "special steels". This claim, rejected by the ITO, was accepted by the AAC and the Tribunal. On reference: Held Emphasis must be laid on the distinction between the manufacture of special steels and the manufacture of an article from special steel. The article manufactured must itself be special steel. If the article manufactured is not special steel, but an article manufactured from special steel, the assessee cannot be said to be manufacturing "special steel". In the instant case, the assessee admittedly purchased special steel from the market and manufactured wire therefrom. The wire manufactured from special steel was a product distinct from special steel. The fact that the special steel had to be subjected to heat treatment in order to draw wire from it would make no difference, as the intermediary process was not relevant, and what had to be kept in mind was the ultimate or end product manufactured and marketed by the assessee. Clearly, the article manufactured by the assessee did not fall within the description of special steel and the assessee was not entitled to development rebate at a higher rate as claimed by it and allowed by the Tribunal. Case review Indian Steel & Wire Products Ltd. v. CIT [1977] 108 ITR 802 (Cal.) relied on. CIT v. Mittal Steel Re-rolling & Allied Industries (P.) Ltd. [1977] 108 ITR 207 (Ker.) and State of MP v. Hiralal AIR 1966 SC 1546 distinguished. Cases referred to CIT v. Mittal Steel Re-rolling & Allied…

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