1979 (10) TMI 66 - HC - Income Tax

High Court rules on development rebate eligibility post-share transfer.

The High Court ruled against the assessee, favoring the department in a case concerning the interpretation of requirements for claiming development rebate ... Change Of Law, Law Applicable, Revised Return Issues:1. Interpretation of the requirements for claiming development rebate under section 33(4) of the Income Tax Act.2. Whether the shareholders transferring their shares after the succession affects the eligibility for development rebate.3. Examination of whether development rebate was allowed to the firm before being claimed by the succeeding company.Analysis:1. The case involved a question of law regarding the allowance of a development rebate for the assessment year 1972-73. The company claimed a development rebate on machinery it acquired from a partnership firm. The Income Tax Officer (ITO) disallowed the claim, but the Appellate Authority Commission (AAC) allowed it. The issue was whether the Income Tax Appellate Tribunal was justified in allowing the rebate.2. The Tribunal considered whether the shareholders transferring their shares after the succession affected the eligibility for the development rebate. The Explanation to section 33(4) required that all shareholders of the company were partners of the firm immediately before the succession. The Tribunal found that this requirement was met, even though the original shareholders later sold their shares to different individuals.3. Another contention was whether the development rebate had been allowed to the firm before being claimed by the company. Section 33(3) required that development rebate should have been allowed to the amalgamating company before it could be claimed by the amalgamated company. The Tribunal failed to examine this aspect in detail, leading to the conclusion that the requirement should have been fulfilled before granting the rebate.In conclusion, the High Court answered the question in the negative, favoring the department and against the assessee. The Tribunal was directed to reconsider the appeal in light of the observations made in the judgment.