Law: Income Tax Act, 1961

Section: 33

Income-tax----Reference---Question of law---Development rebate---Available in respect of plant and machinery installed after 31-5-1974 but before 1st day of June, 1975, if evidence furnished by assessee that he had purchased such plant or machinery or had entered into a contract for purchase of such machinery with manufacturer, owner or dealer before 1-12-1973---Agreement, for supply of plant and machinery entered into on 28-12-1973---Tribunal allowing claim of assessee for development rebate---Whether justified---Question of law arises for reference---Indian Income Tax Act, 1961, Ss.33 & 256(2). For the assessment year 1975-76, the Assessing Officer disallowed the claim of the assessee for development rebate under section 33 of the Income Tax Act, 1961, on the ground that there was no valid contract for supply of machinery prior to December 1, 1973. On appeal, the (N. K. Jain, J) Commissioner (Appeals) confirmed the disallowance. The Tribunal allowed the claim of the assessee and held that it is a well-accepted principle in company law that a promoter cannot act on behalf of the company under incorporation and the company soon after its incorporation has to ratify such actions of the promoters, that the promoter, in the instant case, had only acted on behalf of the company and such contract having been ratified by the company, became the contract of the company and was enforceable against the company by third parties and that, therefore, the Department should have accepted the assessees claim for development rebate. The Tribunal directed the Assessing Officer to grant development rebate to the assessee. The Revenue filed an application under section 256(1) of the Act for referring a question of law, which was rejected by the Tribunal. On an application filed under section 256(2) for directing the Tribunal to refer a question of law, the Revenue contended that the scheme of development rebate was discontinued in-respect of plant and machinery installed after May 31, 1974: Held, that section 16 of the Finance Act, 1974, provided that the benefit of the scheme of development rebate would be available in exceptional cases even in respect of plant and machinery…

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