Law: Income Tax Act, 1961

Section: 33(1)(b),Sched.V,itemNo.(20)

Income-tax------Development rebate---Machinery installed for manufacture of items listed in Sched. V---Need not be exclusively used for manufacture of such items---Use of machinery for manufacture of other items also---Would not disentitle assessee to grant of development rebate at the higher rate of 35 per cent.---Indian Income Tax Act, 1961, S.33(1)(b); Sched. V, item No.(20). The respondent assessee manufactured nuts, bolts and screws for automobile, which fell under item No.(20) in the Fifth Schedule to Income Tax Act, 1961, being "automobile ancillaries". The respondent claimed allowance of development rebate in respect of the assessment year 1969-70 at the rate of 35 per cent. as prescribed under section 33(1)(b)(B)(i)(a) of the income Tax Act, 1961. The Income-tax Officer found that the machinery which was installed was being used not only for the manufacture of items falling in the Fifth Schedule but also for the manufacture of some other items and, therefore, restricted the development rebate on the machinery to 25 per cent. as prescribed under section 33(1)(b)(B)(i)(b). On appeal, the Appellate Assistant Commissioner allowed the claim of the respondent. On further appeal by the Revenue, the Tribunal upheld the assessee's contention. On a reference at the instance of the Revenue, the High Court held that the machinery which was installed was used wholly for the purpose of the business of the assessee. The High Court further held that the machinery which was 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. The High Court, therefore, answered the question in favour of the respondent. On appeal to the Supreme Court: Held, affirming the decision of the High Court, that the items which were manufactured by the respondent-assessee were used wholly for the purpose of its business, that the machinery had been installed before the 1st day of April, 1970, for the manufacture of nuts, bolts and screws for automobiles falling under item No.(20) in the Fifth Schedule being "automobile ancillaries" and…

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