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Commissioner of Income-tax Vs. Narang Dairy Products - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 726 of 1976
Judge
Reported in(1983)36CTR(All)92; [1983]142ITR532(All); [1983]12TAXMAN343(All)
ActsIncome Tax Act, 1961 - Sections 33(2)
AppellantCommissioner of Income-tax
RespondentNarang Dairy Products
Appellant AdvocateM. Katju, Adv.
Respondent AdvocateR.K. Gulati and ;J. Sarup, Advs.
Excerpt:
- .....order of the ito. in second appeal, the income-tax appellate tribunal found that in the relevant year the assessee had carried on business of sale and it also had income from other sources. it held that even though the assessee had ceased to use the assets exclusively in connection with its own business, the provision of section 33(2)(ii) continued to be applicable and the assessee was entitled to carry forward the unabsorbed development rebate and to adjust the same in the year 1970-71. in the result, it allowed the appeal filed by the assessee. at the instance of the commissioner, the income-tax appellate tribunal has stated the case and raised the following question of law for opinion of this court :'whether, on the facts and in the circumstances of the case, the assessee was.....
Judgment:

H.N. Seth, J.

1. The assessee, M/s. Narang Diary Products, Lucknow, were entitled to certain development rebate during the assessment years 1965-66 to 1967-68, which remained unabsorbed. It claimed a set-off of that development rebate in the assessment year 1970-71. The ITO disallowed the claim of the assessee on the ground that it was not entitled to set off the rebate in respect of tbe machinery given by it on hire to M/s. Hindustan Levers Ltd., inasmuch as the said machinery had ceased to be utilized by it for its business purposes. Aggrieved, the assessee went up in appeal before the AAC, who upheld the order of the ITO. In second appeal, the Income-tax Appellate Tribunal found that in the relevant year the assessee had carried on business of sale and it also had income from other sources. It held that even though the assessee had ceased to use the assets exclusively in connection with its own business, the provision of Section 33(2)(ii) continued to be applicable and the assessee was entitled to carry forward the unabsorbed development rebate and to adjust the same in the year 1970-71. In the result, it allowed the appeal filed by the assessee. At the instance of the Commissioner, the Income-tax Appellate Tribunal has stated the case and raised the following question of law for opinion of this court :

'Whether, on the facts and in the circumstances of the case, the assessee was entitled to set off unabsorbed development rebate of the earlier years from the total income of the assessee in the assessment year 1970-71, under Section 33(2) of the Income-tax Act, 1961, even though in this year the assessee had not actually carried on the business and the asset in question had not been used for the purpose of the assessee's business as it had been given on hire ?'

2. Section 33(2) provides the extent to which development rebate, to which an assessee is entitled in a particular year, can be adjusted against the income of that year. Sub-clause (ii) thereof provides that where the amount of the development rebate, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year to nil and the balance of the development rebate, if any, still outstanding, shall be carried forward to the following assessment year and soon. This sub-section nowhere lays it down that before unabsorbed rebate for particular year can be car- ried forward to a subsequent year, for being adjusted or accounted for, it is necessary that the assessee must continue to use the relevant assets exclusively in connection with its business. The only limitation placed by the section pertains to the extent to which it can be so adjusted. In our opinion, the I.T. Appellate Tribunal was justified in coming to the conclusion that the unabsorbed development rebate of earlier years could be carried forward and adjusted against the income of the assessee for the assessment year 1970-71, even though the assets in question had been hired out and were not used for the purposes of the assessee's own business. The view which we are taking is fully in consonance with what has been held by this court in the case of CIT v. Rampur Timber & Turnery Co. Ltd. : [1973]89ITR150(All) . Respectfully following the decision in the aforesaid case, we answer the question referred to us, in the affirmative and in favour of the assessee. The assessee is entitled to costs which are assessed at Rs. 250.


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