1976 (1) TMI 19 - HC - Income Tax

Court rules assessee ineligible for relief under Section 84, development rebate deducted in computing profits.

The court held that the assessee was ineligible for relief under Section 84 for the assessment year 1962-63 as the industrial undertaking had commenced ... New Industrial Undertaking, New Industrial Undertaking, Relief From Income Tax Issues Involved:1. Entitlement to relief under Section 84 for the assessment year 1962-63.2. Eligibility for relief in respect of 30 Hooker Cells installed during the previous year for 1958-59.3. Deduction of development rebate in computing profits and gains for the purpose of Section 84.Detailed Analysis:Issue 1: Entitlement to Relief Under Section 84 for the Assessment Year 1962-63The primary question was whether the first year in which the assessee was entitled to relief for the new industrial undertaking was the assessment year 1957-58 or 1958-59, and whether the assessee was entitled to relief for the assessment year 1962-63 under Section 84. The court examined the facts and found that commercial production using Hooker Cells had commenced by 31st March 1957, with 30 Hooker Cells. The court held that the industrial undertaking had begun to manufacture or produce articles by 31st March 1957, making the first assessment year for relief 1957-58. Consequently, the four succeeding years would end by 1961-62, making the assessee ineligible for relief in the sixth assessment year 1962-63. The court concluded that the first question must be answered accordingly, precluding the assessee from working out its relief for any other assessment year.Issue 2: Eligibility for Relief in Respect of 30 Hooker Cells Installed During the Previous Year for 1958-59The second question addressed whether the assessee was entitled to relief under Section 84 in respect of 30 Hooker Cells installed during the previous year ending 31st March 1958. The court determined that the industrial undertaking relevant for Section 84 is the unit as a whole, not split into parts based on the number of Hooker Cells. The unit functioned with 30 Hooker Cells in the assessment year 1957-58, and there were additions in the previous year for the assessment year 1958-59. The court held that there is nothing in Section 84 that provides for relief based on additions made in subsequent years. Therefore, the assessee could not claim relief only upon completing the 60 Hooker Cells, as the unit had started with 30 Hooker Cells in the previous year ended on 31st March 1957. The court answered the second question in favor of the revenue.Issue 3: Deduction of Development Rebate in Computing Profits and Gains for the Purpose of Section 84The third question involved whether the development rebate in respect of the new industrial undertaking established during the previous year for 1962-63 should be deducted in computing the profits and gains for the purpose of Section 84, and whether the assessee was entitled to any relief under that section. The court analyzed the provisions and held that Section 84(5) requires the computation of profits and gains in accordance with the provisions contained in Chapter IV-D, which includes Section 33 allowing development rebate. The court found that the development rebate must be deducted in computing the profits and gains for the purpose of Section 84. The court also referenced previous cases, including Ashok Motors Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. S. S. Sivan Pillai, to support this interpretation. Consequently, the court concluded that the assessee was not entitled to any relief under Section 84 for the relevant year, answering the third question in favor of the revenue.Conclusion:All three questions were answered in favor of the revenue, and the department was entitled to its costs, with counsel's fee set at Rs. 250.