Development rebate requires proof of actual automobile ancillary manufacture, not merely company registration for financing purposes.

Eligibility for the higher development rebate under section 33(1)(b)(B)(i) depended on whether the plant and machinery were used to manufacture automobile ancillaries. The company manufactured screws and bolts, but the departmental authorities found these to be ordinary goods usable in general machinery rather than items exclusively manufactured as automobile ancillaries. A registration certificate relied on by the company showed only its status for IDA financing and did not prove that its actual production had been registered as automobile ancillary production. The certificate was therefore insufficient, and the higher rebate was denied in favour of the Revenue.

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Issues: Whether the assessee was entitled to development rebate at the higher rate under section 33(1)(b)(B)(i) of the Income-tax Act, 1961 on the footing that its plant and machinery were installed for manufacture of automobile ancillaries.

Analysis: The assessee manufactured screws and bolts, and the departmental authorities found that the goods were ordinary screws and bolts usable in general machinery and not items manufactured exclusively as automobile ancillaries. The certificate relied upon only showed registration of the company as an automobile ancillary for obtaining IDA financing and did not establish that its production had been registered as automobile ancillary production. The finding recorded by the appellate authority that the goods were not items usable only as automobile ancillaries remained undisturbed, and the certificate by itself was insufficient to prove eligibility for the higher rebate.

Conclusion: The assessee was not entitled to development rebate at 25 per cent under section 33(1)(b)(B)(i) of the Income-tax Act, 1961, and the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Mere registration of a company as an automobile ancillary for financing purposes does not establish that its production is of automobile ancillaries for claiming the higher development rebate; eligibility must be proved by the nature of the goods actually manufactured.

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