Development rebate and appellate powers: transfer within the statutory period defeats the rebate, and the tribunal may direct further enquiry.

Development rebate was properly disallowed where machinery or plant was transferred within the statutory period after installation, because the proviso deemed the rebate wrongly allowed once continued ownership was not maintained, and rectification under section 35(11) could reflect that position without first granting the claim. The appellate tribunal also had wide power under section 33(4) to direct the Appellate Assistant Commissioner to entertain and decide a new contention on the taxability of surplus from sale of machinery, since the point fell within the subject-matter of the appeal and further enquiry was permissible on the existing record. Both answers were upheld.

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Issues: (i) Whether development rebate could be disallowed where the machinery or plant was transferred within ten years from the end of the relevant year of installation; (ii) Whether the Appellate Tribunal had jurisdiction to direct the Appellate Assistant Commissioner to entertain and decide a new contention going to the taxability of surplus on sale of machinery.

Issue (i): Whether development rebate could be disallowed where the machinery or plant was transferred within ten years from the end of the relevant year of installation.

Analysis: The proviso to section 10(2)(vib) treated development rebate as wrongly allowed if the machinery or plant was sold or otherwise transferred within the prescribed period. Section 35(11) authorised recomputation as a rectification where such a situation arose. Reading the two provisions together, the legislative intent was that no development rebate was available where the statutory condition of continued ownership was not satisfied. The authority was not bound to allow the claim first and withdraw it later through rectification.

Conclusion: The disallowance of development rebate was proper and was in favour of the Revenue.

Issue (ii): Whether the Appellate Tribunal had jurisdiction to direct the Appellate Assistant Commissioner to entertain and decide a new contention going to the taxability of surplus on sale of machinery.

Analysis: Section 33(4) conferred wide appellate power on the Tribunal to pass such orders as it thought fit within the subject-matter of the appeal. The contention as to taxability of the surplus formed part of the appeal, and the Tribunal could direct further enquiry or rehearing where the basic facts were already on record and the matter required adjudication in the interests of justice.

Conclusion: The Tribunal had jurisdiction to issue the direction, and the point was decided in favour of the assessee.

Final Conclusion: The reference was disposed of by upholding both answers given by the Tribunal, one sustaining the disallowance of development rebate and the other sustaining the Tribunal's power to require the Appellate Assistant Commissioner to consider the additional taxability contention.

Ratio Decidendi: Where a statute deems development rebate to have been wrongly allowed upon transfer of the asset within the prescribed period, the claim may be rejected at the assessment stage itself; and the appellate tribunal's power under section 33(4) extends to directing further enquiry on a contention within the subject-matter of the appeal.

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