1. These appeals by the assessee are directed against the orders of the Commissioner (Appeals) for the assessment years 1975-76 and 1977-78, respectively, dated 2-12-1980 and 20-7-1980. Before we crystallise the issues that have come up for our determination, we set out the facts of the case from which the issues emanate.
2. The assessee is a private limited company registered under the name and style of Bhushan Industrial Co. (P.) Ltd. For the assessment year 1975-76, the original assessment was made on 26-3-1970. The assessment order made by the ITO appears at pages 1 to 3 of the assessee's paper book. In this assessment order, the ITO allowed to the assessee development rebate at 15 per Cent on the cost of machinery of Rs. 8,44,200. The development rebate actually allowed was Rs. 1,26,630. The ITO, however, started reassessment proceedings. Since the validity of the reassessment proceedings is not open for our determination, it would be suffice to say that the issues that emanate from these appeals now are with regard to the reassessment proceedings. The reassessment for the assessment year 1975-76 was made on 11-8-1980. According to the ITO, the assessee also owns Bhushan Steel Rolling Mills. Thus, the appellant-company comprised of two units, namely, Bhushan Industrial Co. (P.) Ltd. functioning at 22, Industrial Area, Chandigarh and Bhushan Steel Rolling Mills, functioning at Industrial Area, Chandigarh. The first unit had been established prior to the second unit. In the first unit, the assessee manufactures railway tracks and parts out of MS rods and bars. In the Bhushan Steel Rolling Mills, which was set up and commenced production with effect from 1-7-1974, the assessee manufactures MS rods, bars and flats, etc., from billets and ingots of iron. The assessee is not a small scale industrial undertaking within the meaning of Explanation to Sub-section (2) of Section 32A of the Income-tax Act, 1961 ('the Act') and was, therefore, entitled to investment allowance under Section 32A of the Act in the relevant assessment year 1977-78.
3. However, when the original assessment for 1975-76 was made, the assessee inadvertently made a claim for development rebate on the plant and machinery installed in the industrial undertaking, working under the name and style of Bhushan Steel Rolling Mills. It is a common ground before us that the assessee was not entitled to allowance of development rebate in the assessment year 1975-76, as the assets on which the development rebate was claimed had been acquired after the date up to which the assessee could claim development rebate. However, the assessee was entitled to the claim of initial depreciation under Section 32(1)(vi). This section reads as under : 32. (1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the follpwing deductions shall, subject to the provisions of Section 34, be allowed- (vi) in the case of a new ship or a new aircraft acquired after the 31st day of May, 1974, by an assessee engaged in the business of operation of ships or aircraft or in the case of new machinery or plant (other than office appliances or road transport vehicles) installed after that date for the purposes of business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in items 1 to 24 (both inclusive) in the list in the Ninth Schedule or in the case of new machinery or plant (other than office appliances or road transport vehicles) installed after that date in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things, a sum equal to twenty per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee, in respect of the previous year in which the ship or aircraft is acquired or the machinery or plant is installed, or if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year then, in respect of that previous year ; but any such sum shall not be deductible in determining the written down value for the purposes of Clause (ii) : Provided that the assessee may, before the expiry of the time allowed under Sub-section (1) or Sub-section (2) of Section 139, whether fixed originally or on extension, for furnishing the return of income for the assessment year in respect of which he first becomes entitled to deduction under this clause, furnish to the Income-tax Officer a declaration in writing that the provisions of this clause shall not apply to him and if he does so, the provisions of this clause shall not apply to him for that assessment year and for every subsequent assessment year ; so, however, that the assessee may, by notice in writing furnished to the Income-tax Officer before the expiry of the time allowed under Sub-section (1) or Sub-section (2) of Section 139, whether fixed originally or on extension, for furnishing the return of income for any such subsequent assessment year, revoke his declaration and upon such revocation, the provisions of this clause shall apply to the assessee for that subsequent assessment year and for every assessment year thereafter : Clause (vi) was inserted by the Direct Taxes (Amendment) Act, 1974, with effect from 1-4-1975. We have not reproduced in this order the second proviso, etc., as we do not consider it material for the determination of the issue before us.
4. When the assessee filed the return in response to notice under Section 148 of the Act issued for the purpose of reassessment under Section 147(b) of the Act, the assessee made a plea that in filing the return originally, development rebate in respect of Bhushan Steel Rolling Mills had been claimed at Rs. 1,26,630 and the same was allowed in the original assessment, though the assessee-company was in fact entitled to claim on the account of initial depreciation under Section 32(1)(vi). This is as per the assessee's letter dated 19-9-1979 appearing at pages 11 to 13 of the paper book. The assessee, therefore, attached a computation sheet showing the originally assessed income by order dated 26-2-1976, adding thereto development rebate amounting to Rs. 1,20,630 already allowed and from the total of Rs. 6,16,910 so arrived at deducting initial depreciation of Rs. 1,68,840 at 20 per cent of Rs. 9,44,200, being the cost of the machinery installed after 31-5-1974. The ITO considered the claim of the assessee. According to him, the assessee was not entitled to initial depreciation as claimed, because MS rods, rounds and flats are commercial articles and cannot be equated with iron and steel (metal) in the basic form. No doubt the qualities of iron and steel are retained in this process, but that will be true in the case of steel furniture, steel utensils also. It cannot be believed that iron and steel (metal) should be given such an extended meaning so as to include everything conceivable from or made of iron and steel. He gave other reasons which he has recorded in his order for not allowing the assessee the benefit of entitlements under Item 1 of the Ninth Schedule, as according to him, the assessee was not qualified for this relief. However, the ITO withdrew the development rebate allowed by him in the original assessment amounting to Rs. 1,26,630. The result was that the income originally assessed by the order dated 26-2-1976 at Rs. 4,90,280 came to be assessed at Rs. 6,16,910 with the addition of Rs. 1,26,630. This assessment was challenged in appeal before the learned Commissioner (Appeals).
5. For the assessment year 1977-78, the process of the assessment in the original proceedings was on when this issue cropped up. In a detailed order, made under Section 143(3)/144B, the ITO rejected the claim of investment allowance made under Section 32A. This Section 32A was inserted by the Finance Act, 1976 with effect from 1-4-1976. The relevant portions of this section are as under : 32A. (1) In respect of a ship or an aircraft or machinery or plant specified in Sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : Provided that no deduction shall be allowed under this section in respect of- (a) any machinery or plant installed in any office premises or any residential accommodation including any accommodation in the nature of a guest house; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under Section 33; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profits and gains of business or profession' of any one previous year.
(2) The ship or aircraft or machinery or plant referred to in Sub-section (1) shall be the following, namely :- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft; (b) any new machinery or plant installed after 31st day of March, 1976; (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule.
The assessment for the assessment year 1977-78 was finalised after consultation with the IAC on 23-7-1979. These assessments were challenged in appeal before the Commissioner (Appeals).
6. The learned Commissioner (Appeals) disposed of the appeal relating to the assessment year 1977-78 first on 20-2-1980. He considered the reasons given by both the sides whether the assessee was entitled to investment allowance or not. The authorities cited before him were duly considered. He finally came to the conclusion that though there were authorities to support the views of both the sides, yet, according to him, "rolling mill is not covered by Item No. 1 of the Ninth Schedule and, therefore, the appellant is not entitled to succeed on its claim of Rs. 97,016 in respect of investment allowance in rolling mills undertaking". The reasons given by the learned Commissioner (Appeals) in his order were adopted for disposal of the appeal for the assessment year 1975-76 vide his order dated 2-12-1980. Hence the present appeal before us.
7. Now, the issue for the assessment year 1975-76 is whether on the facts and in the circumstances of the case, the claim for initial depreciation made by the assessee during the course of the reassessment proceedings under Section 147(6) could be ascertained and allowed by the ITO and for the assessment year 1977-78, the issue is whether on the facts and in the circumstances of the case, the assessee is entitled to investment allowance under Section 32A of the Act.
8. We have heard the parties. The learned counsel for the assessee arguing the appeal for the assessment year 1975-76 contended that the provisions of the statute for allowance of development rebate and initial depreciation, though numbered differently, are in substance pari materia. Therefore, when the ITO while making the original assessment on 26-2-1976 allowed the claim of development rebate of the assessee, he had conceded that the assessee fulfilled the conditions and is manufacturing iron and steel (metal) without which the development rebate could not have been allowed. If the assessee, therefore, made an inadvertent mistake of claiming development rebate instead of claiming initial depreciation for this year, that should not stand in its way, because when the ITO reopens the assessment, the assessee is entitled to project to him the correct position and make an alternative correct claim for an allowance of initial depreciation. For this he called upon the Madras High Court judgment in the case of CIT v. Mahalakshmi Textile Mills Ltd.  56 ITR 256. The learned counsel for the assessee further submitted that Item No. 1 of the Fifth Schedule dealt with the development rebate and Item No. 1 of the Ninth Schedule dealt with the initial depreciation. However, the requirements of the two are identical and on the ratio of the following judgments, the claim of the assessee was clearly admissible and this should have been allowed by the ITO in the reassessment proceedings : CIT v. Mittal Steel Re-rolling & Allied Industries (P.) Ltd.  108 ITR 207 (Ker.), CIT v. West India Steel Co. Ltd.  108 ITR 601 (Ker.) (FB), Singh Engineering Works (P.) Ltd. v. CIT and CIT v. Krishna Copper & Steel Rolling Mills  119 ITR 256 (Punj.).
In fairness, the learned counsel for the assessee pointed out to a judgment of the Calcutta High Court in the case of Indian Steel & Wire Products Ltd. v. CIT  108 ITR 803 and submitted that this only showed that there were two reasonable views possible in the interpretation of the provisions of the statute regarding the claim of initial depreciation made by the assessee and when such a situation arises, a view that favours the subject has to be adopted in view of the Supreme Court judgment in the case of CIT v. Naga Hills Tea Co.
Ltd.  89 ITR 237.
9. For the assessment year 1977-78, it was contended that investment allowance to the assessee should be available as the business is the same as was for the assessment year 1975-76 for which the above submissions have been made and the conditions to be satisfied for the purpose of investment allowance are also similar to the conditions to be satisfied for the purpose of initial depreciation for the assessment year 1975-76.
10. These submissions, however, were opposed very strongly by the learned senior departmental representative Smt. Sudha Sharma. She submitted that the assessee had made a claim for development rebate at the time of the original assessment for the year 1975-76 and the ITO was entitled to withdraw that claim if it was wrongly allowed. It was submitted that the re-assessment is not in challenge and, therefore, the very fact that the assessee concedes that development rebate was wrongly allowed is enough to withdraw the development rebate and go no further. It was further submitted that the assessee is not entitled to initial depreciation at all because it is not manufacturing or producing any article or thing mentioned in Item No. 1 of the Ninth Schedule. The learned departmental representative fortified her submissions with reference to the Calcutta High Court judgment in the case of Indian Steel (supra) to which the learned counsel for the assessee had eluded before coming to the contention that two reasonable views on the issue are possible. The learned departmental representative contended that the reasons and the analysis of the provisions of law has been done in an exhaustive manner by the Calcutta High Court and, therefore, that is the view that may be adopted by us.
11. Replying to the contention of the learned counsel for the assessee that the assessee was entitled to make an alternative claim during the course of re-assessment proceedings, the learned departmental representative pointed out to the judgment of the Kerala High Court in the case of CWT v. C. Ravindran  107 ITR 547. In this judgment, it was contended, it was held by the Court that the Tribunal was not justified in law in holding that at the time of re-assessment under Section 17(1)(a) of the Wealth-tax Act, 1957, the assessee's claim for exemption in respect of agricultural lands, which claim he should have made at the time of original assessment but omitted to make, is admissible. Arguing for the assessment year 1977-78, it was submitted that though the claim was made by the assessee for investment allowance in the original assessment proceedings, yet it is not admissible because of facts of the two years are in part materia and the assessee is not entitled to either initial depreciation for the assessment year 1975-76 or for investment allowance for the assessment year 1977-78.
12. We have given very careful consideration to the rival submissions of the parties and are of the opinion that the claim of the assessee has to be admitted for both the years under appeal. For coming to this conclusion, we have considered the position of law in conjunction with the facts of the case on record. The Kerala High Court in the case of Mittal Steel (supra), after considering the Supreme Court judgment in the case of State of Madhya Bharat v. Hiralalji  2 SCR 75 held that the addition of word 'metal' within brackets after the words 'iron and steel' in Ttem No. 1 of the Fifth Schedule was not intended to limit the scope and ambit of the entry. The Court further held that there was no justification for qualifying Item No. 1, by insisting that the articles produced or manufactured or constructed for the purpose of the business of the assessee-company must be those produced, manufactured or constructed from materials which were not iron and steel. This judgment was delivered on 9-4-1975 by a Division Bench of the Kerala High Court. By the subsequent judgment delivered on 6-7-1976 by the Division Bench of that Court, this view was confirmed. In this Division Bench judgment in the case of Mittal Steel (supra) the facts of the case were that the assessee-company was converting mild steel billets and mild steel ingots of the length of 3 metres and of girth varying sizes into MS rods and steel sections with the aid of machinery. The issue was whether it was engaged in the manufacture of iron and steel (metal) to enable that company to claim the development rebate at 35 per cent for the assessment years 1966 67 to 1971-72. The Kerala High Court held that MS rods and steel sections are basically 'iron and steel (metal)' within the meaning of Item No. 1 of the Fifth Schedule.
13. The revenue has cited the authority of the Calcutta High Court in the case of Indian Steel (supra). In this judgment, the Court has considered a catena of cases and held that wire rods are commercial products made out of iron or steel. Even if the technical meaning of iron and steel were to be taken, into consideration, they would not include wire rods. It would be seen that before the Calcutta High Court, the issue was entirely different. However, at worse it can be said, insofar as the assessee is concerned, that on the issue, there are two reasonable views possible and we have now a settled law that where two reasonable views are possible in the interpretation of a taxing statute, one that favours the assessee has to be adopted. For this, the learned counsel for the assessee has cited the judgment of the Supreme Court in the case of Naga Hills (supra). This proposition has, therefore, to be accepted in interpreting the claim of the assessee that it is covered by Item No. 1 of the Ninth Schedule.
14. However, the question is whether in the re-assessment proceedings for the year 1975-76 that the ITO initiated, the assessee was entitled to make a claim for the initial depreciation when earlier there was no claim for this initial depreciation in the original assessment proceedings and particularly, when earlier, its claim was for development rebate. The learned counsel for the assessee has relied upon the judgment of the Madras High Court in the case of Mahalakshmi Textile (supra) for the proposition that the assessee could make an alternative claim. On the other hand, the revenue has cited the authority of the Kerala High Court in the case of Ravindran (supra) in the wealth-tax proceedings. However, we find that the judgment of the Madras High Court in the case of Mahalakshmi Textile (supra) travelled up to the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd,  66 ITR 710 and the Supreme Court approved the judgment of the Madras High Court given earlier. Since the issue is important, we may as well record the facts that case and the decision of the Supreme Court.
15. The assessee in that case, which carried on the business of manu-facture and sale of cotton yam, spent Rs. 93,215 for introduction of the 'Casablanca conversion system' in its spinning plant.
Substantially, this involved replacement of certain roller stands and fluted rollers fitted with rubber aprons to the spinning machinery, removal of ring frames from certain existing parts, introduction, inter alia, of ball-bearing jockey. pulleys for converting the original band-drivers to tape drivers and other additions and alterations in the drafting mechanism. The assessee claimed development rebate on the ground that introduction of the 'Casablanca conversion system' involved installation of new machinery and for the first time before the Tribunal, claimed in the alternative that the amount laid out was in any event expenditure for current repairs allowable under Section 10(2)(v) of the 1922 Act. The Tribunal inspected the factory, studied the working of the machinery and considered the literature of the manufacturers and held that though development rebate was not admissible, the amount spent was admissible under Section 10(2)(v) since as a result of the stress and strain of production over a long period there was need for change in the plant and that the assessee had replaced old parts. The Court held on these facts that the Tribunal had evidence before it from which it could be concluded that by introducing the 'Casablanca conversion system' the assessee made current repairs to the machinery and plant and the sum of Rs. 93,215 was allowable as an expenditure incurred for current repairs. The Court further held that because the Tribunal rejected the assessee's claim for development rebate, it was not bound to disallow the claim of the assessee for allowance of the amount spent, if it was a permissible allowance on another ground. Whether the allowance was admissible under one head or another of Sub-section (2) of Section 10 of the 1922 Act, the subject-matter for the appeal remained the same. We thus find that if the subject-matter of appeal remains the same, the Tribunal is empowered to entertain an alternative claim of the assessee. However, the issue is whether this claim can be entertained in re-assessment proceedings.
16. It is trite law that if in the re-assessment proceedings under Section 147 it is found that the assessee's total income is actually less than the income assessed, the assessee would not be entitled to have the assessment revised downward under this section. If the ITO finds that the re-assessment proceedings result into a refund, he may not grant the same and may drop the proceedings. However, in the present case, we find that on the facts and in the circumstances of the case, the assessee is entitled to the claim in the re-assessment proceedings The admitted facts by the ITO are that Bhushan Steel Rolling Mills manufacture MS rods and flats. These are certainly iron and steel (metal) in view of our above discussion, as there are judgments interpreting similar provisions of the Fifth Schedule and we apply the same in interpreting Item No. 1 of the Ninth Schedule. The provisions are in pan materia. The ITO has admitted that the qualities of iron and steel are retained in the manufactured products. Therefore, in our considered opinion, the assessee is manufacturing or producing iron and steel (metal) within the meaning of Item No. 1 of the Ninth Schedule. In the re-assessment proceedings, the assessee could make a claim for the assessment year 1975-76 because the subject-matter before the ITO was the same. Earlier, on the same set of facts, the assessee had made a claim for development rebate which wrongly put in the re-assessment proceedings, the ITO was bound to consider the subject-matter being the same whether the claim could be allowed by way of initial depreciation. Since the authorities below did not allow the claim of the assessee, we entertain this claim in the present appeals and we allow the same because the assessee is manufacturing iron and steel (metal) within the meaning of Item No. 1 of the Ninth Schedule.
17. However, in the re-assessment proceedings, the assessee cannot be better off and, therefore, though the claim of initial depreciation made by the assessee is of Rs. 1,68,840, in our opinion, it can be allowed, on the very peculiar set of facts of this case, only to the extent of Rs. 1,26,630 which was the amount of development rebate allowed in the original assessment proceedings. We direct that for the assessment year 1975-76, this amount be allowed by way of initial depreciation. The claim of the assessee to that extent is allowed for the assessment year 1975-76.
18. For the assessment year 1977-78, we direct that the investment allowance be allowed to the assessee as it satisfied the requisite statutory conditions prescribed.