1. The only point for determination in this appeal, filed by the assessee, is whether he had entered into a contract for the purchase of the X-ray machine before 1-12-1973 and, consequently, whether he was entitled to development rebate on that machine.
2. Under the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. SO 2167 dated 28-5-1971 issued under Sub-section (5) of Section 33 of the Income-tax Act, 1961 ("the Act"), development rebate will not be allowed in respect of ships acquired or machinery or plant installed after 31-5-1974. Section 16 of the Finance Act, 1974, however, provided that if the assessee furnishes evidence to the satisfaction of the ITO that before 1-12-1973, he had purchased such machinery or plant or had entered into a contract for the purchase of such machinery or plant with the manufacturer or owner of, or a dealer in such machinery or plant, the above prohibition against the allowance of development rebate will not apply. It is the assessee's contention, in the present case, that he had entered into a contract with the suppliers of the machinery before 1-12-1973, for the supply of the X-ray machine. The relevant facts are as follows : 3. On 22-11-1973, the assessee wrote the following letter to International GEC, New Delhi : With reference to your quotation dated 20th November, 1973,1 request you to kindly book my order for 60 mn X-ray Plant. Please depute your representative to visit Bhiwani, so that I may have further discussion with him in the matter and also pay him the advance.
This will acknowledge receipt of your letter dated 22nd November, 1973 placing with us your order for 60 mn X-ray Plant. We have booked your order and as desired the undersigned would be shortly visiting you to discuss further and take the advance so that we can forward your order to our Head Office for execution.
Subsequently, the company sent its representative to the assessee on 13-12-1973 and also despatched the X-ray machine from Poona on 1-11-1974. The machine was received at Bhiwani on 19-11-1974 and its installation at the assessee's premises was completed on 17-1-1975.
4. Referring to the letter dated 26-11-1973 from the International, GEC, the ITO observed that the company has made it clear that its engineer would be visiting the assessee to discuss the matter and to take the necessary advance, so that it can forward the assessee's order to its head office for execution. This, according to the ITO, showed that the payment of the advance was a pre-condition for the confirmation of the contract between the assessee and the company. As this was done only on 13-12-1973, beyond the date within which the contract had to be completed, namely, 1-12-1973, he held that the assessee was not entitled to development rebate on the cost of the X-ray machine. The AAC, on appeal by the assessee, agreed with the view taken by the ITO. The assessee is, therefore, in second appeal before the Tribunal.
5. The assessee, appearing for himself, contended that the view taken by the authorities below with regard to the date of entering into the contract was clearly wrong. According to him, the payment of the advance was not a pre-condition imposed by the company for confirming the contract. He referred to the company's letter dated 26-11-1973, wherein it is stated, "we have booked your order".
The latter part of that sentence, "and as desired the undersigned would be shortly visiting you to discuss further and take the advance", according to him, is only a condition subsequent to the booking of the order and it was as per the assessee's own request that the company was deputing its representative for discussions with the assessee. In this connection, he referred to the decision of the Supreme Court in Jawaharlal v. Union of India AIR 1962 SC 378, in which it has been held that an acceptance letter stating that the contract was concluded but it was subject to making a security deposit, is a concluded contract on the date of the acceptance letter and the payment of security deposit was only a condition subsequent and not a condition precedent to the entering of the contract. In the present case, it was pointed out by him, the company had never asked for an advance prior to the booking of the order. By his letter dated 27-11-1973, the assessee had made a request to the company to book his order for the X-ray plant and by its letter dated 26-11-1973, the company confirmed that it has booked the assessee's order. These two letters, read together, concluded the contract, according to the assessee.
6. The learned departmental representative relied on the order of the ITO and submitted that both in the assessee's letter as well as in the reply of the company, there was a reference to the payment of the advance and, consequently, such payment was an integral part of the contract and has to be considered as a pre-condition for the conclusion of the contract. As the advance was paid only after 1-12-1973, he submitted that the contract was not concluded before 1-12-1973.
7. I have considered the rival submissions on this point. In my view, the assessee is correct in his submission that the payment of the advance was not a pre-condition for the conclusion of the contract.
There is no material on record to show that the company had imposed any such condition before booking the assessee's order. In fact, the statement contained in the company's letter dated 25-11-1973 is very categorical to the effect that in response to the assessee's request contained in his letter dated 23-11-1973, the company has booked his order. The subsequent incidents of the company's representative visiting to the assessee for discussions and for receiving the amount of advance are only incidents subsequent to the conclusion of the contract between the assessee and the company for the supply of the machine. The company's letter dated 26-11-1973, accordingly, denotes the acceptance of the assessee's offer to purchase the X-ray plant from the company and, consequently, the contract for all purposes was concluded on 26-11-1973, which clearly falls prior to 1-12-1973.
Accordingly, the assessee is entitled to development rebate on the X-ray machine installed by him. The ITO is directed to allow the same.