TaxTMI 
TaxTMI 
1981 (4) TMI 85
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....hines on hire. In the relevant assessment years, i. e., from 1963-64, the entire hire charges payable by the Indian subsidiary to the assessee-company have been remitted to U. K. in full every year. The assessee-company does not draw up a separate profit and loss account and balance-sheet for its Indian business but keeps a consolidated profit and loss account of its entire global activity in the U. K. Thus, the rental received by the assessee-company from its Indian subsidiary company forms part of the total rentals shown in its consolidated profit and loss account maintained in the U.K. However, in the consolidated balance-sheet in the U.K., the assessee-company created a separate development rebate reserve in regard to its Indian business under the head " Appropriation to Reserves " with a sub-head " Development Rebate Reserve (India) from year to year. In respect of the five assessment years in question, the assessee-company's claim for grant of development rebate was rejected by the ITO on four grounds, one of the grounds being that the Indian company had remitted the rentals as profits to the assessee-company. The ITO also held that the data processing machines were ....
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.... years 1962-63 and 1963-64, and to recompute the development rebate admissible for the years 1959-60, 1960-61 and 1961-62, in regard to such number of machines for which the reserves created did not fall short of the 75% of the rebate admissible. Arising out of this order of the Tribunal, the following two questions have been referred to this court under s. 66(1) of the Indian I.T. Act, 1922, and s. 256(1) of the I.T. Act, 1961? " 1. Whether, on the facts and in the circumstances of the case, the data processing equipment could be regarded as 'office appliances' for the purpose of granting development rebate for the assessment years 1960-61, 1961-62, 1962-63 and 1963-64 ? 2. Whether, on the facts and in the circumstances of the case, the amount equal to 75% of the development rebate, credited to reserve could be said to have been utilised by the assessee-company for remittance outside India as profits ? " The controversy which is put in issue in the first question, viz., whether the data processing machines are office appliances for the purposes of development rebate under s. 33(1) of the I.T. Act, 1961, has been considered in sufficient detail in the earlier decision of t....
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.... has not been utilised for distribution by way of dividends or profits. Now, the learned counsel for the revenue has contended that the entire amount of rental earned by the Indian subsidiary has been remitted by it to the assessee-company and, therefore, the assessee-company is disentitled from claiming development rebate in view of the second condition in cl. (a) of s. 34(3) of the I.T. Act, 1961. What is argued is that the entire amount which was remitted, included profits and, therefore, the entire profits earned by the Indian company had been remitted outside India. The Tribunal has positively observed in its order that it was not the case of the revenue that any part of the reserve account had been remitted outside India for the creation of any asset outside India. The only question, therefore, is whether, when the entire rental income of the Indian subsidiary has been remitted to the assessee-company in U.K., it constitutes an amount out of the reserve account remitted outside India as profits. The scheme of s. 34(3)(a) shows that it was not intended to give benefit of development rebate to an assessee, who having crediting the reserve account for the purposes of ea....
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....d by s. 34(3)(a) is that the reserve account should not be drawn upon during a period of eight years next following the year in which the reserve is credited. The prohibition in s. 34(3)(a) against the amount credited to reserve account being utilised in the manner indicated by cls. (i) and (ii) thus operates in respect of the eight years next following the year in which the amount has been credited to the reserve account. The argument before us is that each of the years of account is concerned, all the monies earned have been remitted to the U.K. This overlooks the fact that the stipulation in s. 34(3)(a) is in respect of the period of eight years following the year in which the reserve is created. Any remittances in the year in which the amount has been later credited to the reserve account will not at all attract the prohibition under s. 34(3)(a), cls. (i) and (ii). Therefore, on the mere fact that all the amounts earned have been remitted in the respective accounting years, the assessee was not entitled to the benefit of development rebate cannot be sustained on the wording of s. 34(3)(a). Though we have already pointed out that on the terms of s. 34(3)(a) the prohibition....