LexM/S. SOUTH INDIA STEEL ROLLING MILLS, MADRAS versus COMMISSIONER OF INCOME TAX, MADRAS
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A
MIS. SOUTH INDIA STEEL ROLLING MILLS, MADRAS
v.
COMMISSIONER OF INCOME TAX, MADRAS
FEBRUARY 25, 1997
B
(S.C. AGRAWAL AND G.B. PATTANAIK, JJ.]
Income Tax Act, 1961-Sections 33(1)(a), 34(3)(a) 155, 263-Whether
revision of assessment by the Commissioner under Section 263 withdrawing
development rebate granted to the assessee finn under section 33(1)(a) for
C the assessinent years 1962-63, 1963-64, 1967-68, 1968-69 on dissolution of the
old parlnership finn due to death of one of the partners before the expiry of
the statutory period of eight years prescribed by section 34(3 )(a) is justified
and proper-Held : The new partnership firm constituted by the surviving
parlner and the legal heirs of the deceased to carry on the same business is
D not entitled for the development rebate-As the old fim1 to whom development
rebate was granted stood dissolved before the expiry of the statutory
perio~The expression "by the assessee" occurring in section 33(J)(a) and
34(3)(a) refers to the same assessee-Commissioner notprecluded from ex-
ercising power of revision under section 263 in respect of an assessment which
E could have been rectified by the Income Tax Officer under Section 155-<:om-
missioner empowered under section 263 to take into consideration the dis-
solution of ihe partnership finn which took place to passing of his order.
The assessee, a partnership firm had obtained the benefit of
"development rebate" under section 33(1)(a) of the Income Tax Act, 1961
F for the assessment years 1962-63, 1963-64, 1967-68 and 1968-69. But due to
death of one of the two partners, it stood dissolved on March 3, 1968,
before the expiry of the statutory period of eight years. A new partnership
was constituted comprising of the surviving partner and the legal heirs of
the deceased partner to carry on the same business.
G
The Commissioner of Income Tax, in exercise of his powers under
S. 263 of the Act, withdrew the "development rebate"granted to the assessee
for the said assessment years since the old partnership firm stood dis-
solved before the expiry of the statutory period of eight ye_ars. The assessee
filed an appeal before the Tribunal which was rejected. At the instance of
H the assessee, the Tribunal referred to the High Court the question whether
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SOUTH INDIA STEEL ROLLING MILLS v. C.I.T.
489
the revision of the assessment under section 263 of the Act by the Com- A
missioner withdrawing the development rebate granted for the relevant
assessment years was proper a~d justi'fied.
. .
The High Court answered against the assessee and in favour of the
Revenue. Being aggrieved, the assessee filed this present appeal interalia
on the ground that after the dissolution of the old _partnership firm, the B
new partnership firm carried on the same busines~, the requirements of
section 33(1)(a) and 34(3)(a) of the Act were fulfilled and as such the
benefit of development rebate could not be withdrawn'
Dismissing the appeal, this Court
HELD : 1. The condition for grant of rebate under section 33 read
with section 34(3)(a) of the Income Tax Act, 1961, would not be satisfied
if the assessee who had availed of the rebate ceased to exist before expiry
of the period of eight years. Having regard to the words ''which is owned
c
by the assessee and is wholly used for the purpose of the business carried D
on by him," occurring in section 33(1)(a), it has to be held that the benefit
of development rebate is available only to the assessee who is o'Wning the
machinery or plant or is using it wholly for the purpose· of the business
carried on by him. Similarly in section 34(3)(a) the words used are "to be
utilised by the assessee during a period of eight years next following for E
the purpose of the business of the undertaking." The grant of development
rebate under section 33(1)(a) is subject to the conditions laid down in
section 34(3)(a) which means that the assessee who has obtained the
development rebate under section 33(1){a) must also be the same assessee
who should utilise the amount credited to the reserve account during the
period of eight years next following for the purpose of the business of the F
undertaking for which the development rebate was given. The expression
"by the assessee" used in these provisions refer to the same assessee. The
High Court has rightly held that in view of section 34(3)(a) the appellant
assessee could not avail of the benefit of development rExcerpt shown. Read the full judgment & AI analysis in Lexace.