Development rebate reserve conditions: data processing equipment is not an office appliance, and pre-reserve remittances do not breach the statutory bar.

Data processing equipment was held not to be an office appliance for development rebate purposes, following the court's earlier binding view, so the revenue's objection on that ground failed. The reserve condition for development rebate was also construed strictly: only actual use of the credited reserve during the statutory period for dividends, profits, or remittance outside India is prohibited, and remittances made before the reserve came into existence do not amount to utilisation of that reserve. On both issues, the reference was answered against the revenue and in favour of the assessee.

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Issues: (i) Whether data processing equipment could be regarded as office appliances for the purpose of development rebate. (ii) Whether the amount equal to 75% of the development rebate credited to reserve could be said to have been utilised for remittance outside India as profits.

Issue (i): Whether data processing equipment could be regarded as office appliances for the purpose of development rebate.

Analysis: The question was concluded by the earlier binding decision of the court holding that data processing machines are not office appliances and are eligible for development rebate under the relevant provision. The same reasoning governed the present reference.

Conclusion: The equipment could not be regarded as office appliances. The issue was answered in the negative and against the revenue.

Issue (ii): Whether the amount equal to 75% of the development rebate credited to reserve could be said to have been utilised for remittance outside India as profits.

Analysis: The statutory condition requires that the reserve account, once created, must not be utilised during the prescribed period for distribution by way of dividends or profits, or for remittance outside India as profits. Current remittances of rental income made before the reserve came into existence do not constitute utilisation of the reserve. The prohibition operates only when the credited reserve is actually drawn upon within the statutory period for a prohibited purpose.

Conclusion: The credited reserve could not be treated as having been utilised for remittance outside India as profits. The issue was answered in the negative and against the revenue.

Final Conclusion: The reference was answered wholly in favour of the assessee, and the revenue's challenge to the development rebate claim failed.

Ratio Decidendi: Development rebate cannot be denied unless the credited reserve is actually utilised within the statutory period for a prohibited purpose, and data processing equipment is not an office appliance for that purpose.

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