COMMISSIONER OF INCOME-TAX, MADRAS versus MAHALAKSHMI TEXTILE MILLS LTD.

Citation: [1967] 3 S.C.R. 957 · Decided: 05-05-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
COMMISSIONER OF INCOME-TAX, MADRAS 
v 
MAHALAKSHMI TEXTILE MILLS LTD. 
May 5, 1967 
B 
[J. C. SHAH, S. M. SIKRI AND V. R.AMASWAMI, JJ.] 
c 
D 
E 
F 
G 
H 
Indian Income-tax Act, 1922 (Act JI of 1922) s. 33-P/ea not raised 
before department-If can be before Tribunal. 
Expenditure on introducing the Casabalanca conversion system in the 
spinning plant of the assessee was not allowed as "development rebate" 
by the Income-tax Officer and the Appellate Commissioner, The Appel-
late Tribunal after inspecting the factory and considering the literature 
an.I Gove,mment notifications, h,eld that the "xpenditu:re, though not 
admissible as development rebate, was admissible as an allowance for 
current repairs to the existing machinery under s. lO(i) XV 
of 
the 
Income-tax Act. 
The High Court, on reference, accepted the Tribunal's 
finding and held that the Tribunal had jurisdiction to permit the asscssee 
to raise a new contention which was not raised before the departmental 
authorities. In appeal by the Commissioner. this Court, 
HELD : The appeal must be dismissed. 
Under sub-s. ( 4) of s. 33 of the Indian Income-tax Act, 1922. the 
Appellate Tribunal is competent to pass such orders on the appeal "as 
it thinks fit". 
There js nothing in the Income-tax Act which restricts 
the Tribunal to the determination of ouestions rais·~d before the depart-
mental authorities. All questions whether of law or of fact which relate 
to the assessment of the assessee may be raised before the Tribunal. 
If 
for rca.'i'ons recorded by the departmental authorities in rejecting a con-
tention raised by the asscssee, grant of relief to him on another ground is 
justified, it would be open to the departmental authorities and the Tribu-
nal, and indeed they would be under a duty to grant that relief. 
~ The 
right of the asscssce to relief is no,t restricted to the plea raised by him. 
[959D-Fl 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 784 of 
1966. 
Appeal by special leave from the judgment and order dated 
March 12, 1964 of the Madras High Court in Tax Case No. 157 
of 1961. 
D. Narsaraju and R. N. Sachthey, for the appellant. 
R. Gopalakrishnan an<;_! N. Srinivasan, for the respondent. 
The Judgment of the Court was delivered by 
Shah, J. 
The respondent-hereinafter called 'the assessee'-
carries on the business of manufacture and sale of cotton yam. 
In the previous year relevant to the assessment year 1956-57. 
the assessee spent Rs. 93,215/- for introduction of "Casablanca 
conversion system" in its spinning plant. 
Substantially this in-
volved replacement of certain roller stands and fluted rollers fitted 
~·, 
958 
SUPREME COURT REPORTS 
[1967) 3 S.C.R. 
with rubber aprons to the spinning machinery, r~moval of ring. 
frames from certain existing parts, introduction, inter a/ia, of ball-
bearing jockey-pulleys for converting the original band-drivers to 
tape-drivers and other additions and alterations in the drafting 
mechartism. 
The Income-tax Officer disallowed the claim of the assessee 
for Rs. 93,215/- because it was not admissible as "development 
rebate" since the introduction of Casablanca conversion system 
did not involve installation of "new machinery". 
The Appellate 
Assistant Commissioner agr.eed with the Income-tax Officer. In 
appeal to the Appellate Tribunal, besides submitting the claim 
that expenditure was allowable as development rebate, the assessee 
urged that the amount laid out for introducing the Casablanca 
conversion system was in any event expenditure allowable under 
s. 10 ( 2) ( v) of the Indian Income-tax Act. 
The Tribunal ins-
pected the spinning factory of the assessee and studied the work-
ing of the machinery with the Casablanca conversion system in 
the process of spinning yarn. They also considered the liierature 
published by the manufacturers of Casablanca co_nversion system 
and the relevant notification issued by the Ministry of Commerce, 
Government of India, defining the import policy, and held that 
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 by introducing the Casablanca 
conversion system. 
In the view of the Tribunal the expenditure 
incurred for introducing the Casablanca conversion system, 
though not admissible as development rebate, was admissible as 
an allowance under s. 10(2) (v) of the Indian Income-tax Act. 
The Tribunal then referred the following two 

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