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Meteor Satellite Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Ahmedabad
Decided On
Judge
Reported in(1986)15ITD367(Ahd.)
AppellantMeteor Satellite Ltd.
Respondentincome-tax Officer
Excerpt:
.....sale was after that period and in any case the difference was only of a few months if the eight year period was counted from the end of accounting period which was 31-3-1971. he argued that the purpose was served by not selling machinery for eight years and so the breach was only technical or venial. he further relied upon the decision of nagpur tribunal in the case of ito v. shakti offset works [1983] 3 itd 451 where the tribunal had held that the word 'year' in section 34(3)(a) meant calendar year. therefore, according to him, the word 'year' could be given any other meaning than previous year such as diwali year or co-operative year also.3. the learned departmental representative replied that the case of vikram mills ltd. {supra) was not concerned with the sale within a period of.....
Judgment:
1 The assessee in this case was allowed development rebate amounting to Rs. 1,38,244 in respect of certain machinery. However, this machinery was sold. The dates of purchase for various pieces of machinery are as follows : The date of sale is 7-2-1981. The ITO withdrew the said development rebate under Section 155 of the Income-tax Act, 1961 ('the Act') on the ground that the machinery had been sold within less than eight years of its acquisition. The Commissioner (Appeals) upheld the order of the ITO.2. Before us, Shri J.P. Shah, the learned counsel for the assessee, relied upon the decision of the Gujarat High Court in the case of Vikram Mills Ltd. v. ITO [1976] 105 ITR 423 where according to him, if the breach of the conditions under Section 34(3)(a) of the Act was technical and venial, the benefit could not be withdrawn. He argued that if eight years were to be counted from the date of purchase of the machinery, the sale was after that period and in any case the difference was only of a few months if the eight year period was counted from the end of accounting period which was 31-3-1971. He argued that the purpose was served by not selling machinery for eight years and so the breach was only technical or venial. He further relied upon the decision of Nagpur Tribunal in the case of ITO v. Shakti Offset Works [1983] 3 ITD 451 where the Tribunal had held that the word 'year' in Section 34(3)(a) meant calendar year. Therefore, according to him, the word 'year' could be given any other meaning than previous year such as Diwali year or co-operative year also.

3. The learned departmental representative replied that the case of Vikram Mills Ltd. {supra) was not concerned with the sale within a period of eight years and pointed out that both the cases of Vikram Mills Ltd. {supra) and Shakti Offset Works (supra) were concerned with the application of Section 34(3)(a) and so they were not applicable to the present case.

Shri J.P. Shah replied that since Section 34(3)(a) spoke of debiting to profit and loss account of the relevant previous year and eight years next following were to be counted, the meaning in both the clauses {a) and {b) was the same. He also argued that the previous year could be changed by the assessee and so the sale could well have been kept outside the end of the eight years.

4. For the sake of convenience, the relevant parts of clauses (a) and (b) of Section 34(3) are reproduced below : (a) The deduction referred to in Section 33 shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, . . .

(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under Section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of Sub-section (5) of Section 155 shall apply accordingly : In the case of Vikram Mills Ltd. (supra) what had happened was that the assessee had merged development rebate reserve with a general reserve and distributed the dividend. The Court noted that the development rebate reserve had been kept intact in a separate reserve but only at the end of the period of eight years the decision was taken by the assessee to merge it with the general reserve and even after it was merged it was not utilised for any of the prohibited purposes. It was because of these facts that the Court held that 'even if there was any breach of the implied condition of Section 34(3)(a) the breach was technical and venial'. The Court has gone on to say that the expressed provisions of Section 34(3)(a) were not contravened either in substance of in form. Therefore, in our view, it cannot be said that the Court's decision was based on any conclusion that the breach in that case was technical or venial. So much for the Gujarat High Court decision.

Regarding the Tribunal's decision in the case of Shakti Offset Works (supra), in our view the language of Clause (a) is not as explicit as that of Clause (b) which does not admit of any two opinions. Clause (b) speaks clearly of 'eight years from the end of the previous year in which it was acquired or installed'. Therefore, we have to take the last date of the previous year and count the period of 365 days for every year until we come to the last day of the eighth year in this way. There is no scope for reducing this period by the assessee changing his previous year. The period becomes fixed in the very first previous year in which the machinery is acquired or installed and thereafter it is a matter of only taking eight years without considering what the subsequent previous years are. There is no possibility of taking any other meaning for the word 'year' such as calendar year, Diwali year or co-operative year as suggested by Shri J.P. Shah. The language or the text of the clause is clear and when the text is clear the text is conclusive.

5. The order of the Commissioner (Appeals) is confirmed and the appeal is dismissed.


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