TaxTMI 
TaxTMI 
TaxTMI 
1972 (7) TMI 28
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....ertain machinery were not taxable since the business was not in existence at any time during the relevant previous years. In order to properly appreciate and determine those questions it would be necessary to set out a few facts and we proceed to do so. 2. The assessee-company runs two textile mills, one at Bombay and the other at Baroda. It also owns another industrial unit at Kathwada which is known by the name of "Maize Products". During the course of proceedings for assessment to income-tax for the assessment years 1959-60 and 1960-61, the assessee claimed an allowance by way of development rebate in respect of machinery and plant, etc., installed in the textile mill at Bombay. The Income-tax Officer found that the assessee was entitled to an allowance in the sums of Rs. 7,35,533 and Rs. 4,51,104, respectively, by way of development rebate in the concerned assessment years. He, however, observed that since the mill was sold by the assessee some time in 1961, that is, before the expiry of ten years from the end of the relevant accounting periods, the claim for allowance by way of development rebate was not allowable. The contention of the assessee before the Income-tax Officer ....
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.... that question to enter upon any fresh investigation into questions of fact. The Tribunal upheld the argument observing that the contention sought to be raised by the assessee went to the root of the matter and that substantial justice required that the assessee should be given an opportunity to make good his contention. The Tribunal, therefore, directed the Appellate Assistant Commissioner to hear the assessee in regard to the contention sought to be raised by it and decide the matter after hearing both the parties and taking into account such material as may be placed before him. These are the facts material for the decision of the second question. 4. The assessee and the revenue were both aggrieved by the decision of the Tribunal and at their instance the Tribunal has stated a case in respect of the following two questions: "(1) Whether, on the facts and in the circumstances of the case, the asssesee's claim for development rebate was rightly disallowed ? (2) Whether, on the facts and in the circumstances of the case, it was competent for the Tribunal to direct the Appellate Assistant Commissioner to ascertain the assessee's ground in regard to the taxability of th....
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....h the machinery or plant was installed, the machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, the development rebate originally allowed shall be deemed to have been wrongly allowed and the Income-tax Officer may, notwithstanding anything contained in this Act, proceed to recompute the total income of the assessee for the relevant year as if the recomputation is a rectification of a mistake apparent on the record within the meaning of the said section within the prescribed time limit. 7. It is clear from a combined reading of the relevant part of the proviso to clause (vib) of sub-section (2) of section 10 and sub-section (11) of section 35 that the legislature clearly intended that no allowance by way of development rebate would be available if the machinery or plant in respect of which it is claimed is sold or otherwise transferred by the assessee to any person other than the Government at any time before the expiry of ten years from the end of the year in which it was acquired or installed. This is apparent, in the first instance, from the fact that the proviso to section 10(2)(vib) enacts a fiction to the effect that ev....
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....t would have to be treated ultimately as having been wrongly allowed and then to recompute the income of the assessee for the relevant year in exercise of the powers of rectification. 8. It would not be reasonable to attribute to the legislature the intention that the Income-tax Officer should resort to such circumambulatory procedure in order to disallow an obviously untenable claim for development rebate. In our opinion therefore, the Tribunal was right in taking the view that the assessee's claim for development rebate was rightly disallowed. 9. That takes us to, the consideration of the second question referred by the Tribunal. As stated earlier the Appellate Assistant Commissioner, for reasons recorded by him, did not allow the assessee to raise before him for the first time a contention to the effect that the profits realised on sale of the artificial silk mill machinery were not taxable since the business was not in existence at any time during the relevant previous years. In appeal before the Tribunal, the assessee urged that the basic facts necessary and relevant for deciding the contention raised by it were already on record and, therefore, the Appellate Assistant C....