High Court Of Madhya Pradesh : Indore Bench
CIT vs. Vippy Solvex Products (P) Ltd.
Sections 33, 256(1), 1974FA 16(c)
Asst. Year 1975-76, 1976-77
A.M. Sapre & Ashok Kumar Tiwari, JJ.
IT Ref. No. 22 of 1997
5th October, 2004
Counsel Appeared
R.L. Jain, for the Applicant : S.C. Goyal, for the Respondent
JUDGMENT
A.M. Sapre, J. :
This is a reference made under s. 256(1) of the IT Act at the instance of Revenue (CIT) by the Tribunal to this Court for answering the following question of law by this Court which is said to arise out of the order of the Tribunal passed on 17th Sept., 1993, in ITA Nos. 662 and 663/Ind/1998 :
“Whether, on the facts and in the circumstances of the case, Tribunal was justified in law in allowing development rebate on plant and machinery for which agreement to supply was entered into on 28th Dec., 1973 ?”
Facts insofar as they are relevant and stated in the statement of case drawn by the Tribunal, may be taken note of in brief. The assessee is a private limited company. It was incorporated on 7th Sept., 1973. It is engaged in the business of manufacture of oil and oil cakes, extraction of hydrogenated oil and deoiled cakes. The assessment year involved in this reference is 1975-76, the relevant accounting year of which ended on 31st Dec., 1974. The assessee commenced its business operation from 13th Nov., 1974, and could do it for 40 days. It is in this assessment year, the assessee claimed the benefit of development rebate of Rs. 5,27,463 in terms of s. 33 of the Act. The AO by order dt. 21st Nov., 1980 (Annex. A), disallowed the claim of development rebate of assessee, inter alia, on the ground that the same does not satisfy the requirement of s. 16(c) of the Finance Act, 1974. The assessee felt aggrieved of this order, filed an appeal to CIT(A). By order dt. 24th May, 1988 (Annex. B), the CIT(A) upheld the order of AO and dismissed the appeal. The assessee felt aggrieved, filed further appeal to Tribunal. By order dt. 17th Sept., 1993 (Annex. C), the Tribunal allowed the appeal and while setting aside the orders passed by AO and CIT(A), granted benefit of development rebate as claimed by assessee in the relevant assessment year in question. It is against this order, the Revenue sought reference to be made to this Court by the Tribunal. As observed supra, by order dt. 27th Dec., 1996, the Tribunal acceded to the prayer made by the Revenue in RA No. 294/Ind/1993 and accordingly referred the aforementioned question of law to this Court under s. 256(1) of the Act for answer. This is how this reference has come to this Court at the instance of Revenue.
Heard Shri R.L. Jain, learned counsel for the applicant, and Shri S.C. Goyal, learned counsel for the nonapplicant. Having heard learned counsel for the parties and having perused record of the case, we are of the view that this reference has to be answered in favour of Revenue and against the assessee. In other words, the question referred to this Court has to be answered in favour of Revenue and against the assessee. As observed supra, the question that arises for consideration in this reference is whether on facts found and referred to this Court, can it be held that assessee is entitled to claim the development rebate on plant and machinery for which agreement to supply was entered into on 28th Dec., 1973 ? Sec. 33 of the Act deals with the claim relating to development rebate. However, the benefit of development rebate was discontinued/withdrawn by Notification No. S.O. 2167, dt. 28th May, 1971. It provided that in exercise of powers conferred by s. 33(5) of the IT Act, the Central Government hereby directs that the deduction in respect of development rebate under s. 33 of the said Act shall not be allowed in respect of a ship acquired or machinery or plant installed after 31st May, 1974. However, s. 16 of the Finance Act, 1974, made exception and provided that on fulfilment of the conditions stipulated in s. 16(a), (b) and (c), the benefit will continue for those assessee. So far as this case is concerned, s. 16(c) is material which reads as under : “16(c) Any machinery or plant [not being machinery or plant referred to in cl. (b)] installed by any assessee after the 31st day of May, 1974, but before the last day of June, 1975, if the assessee furnishes evidence to the satisfaction of the ITO that before the 1st day of December, 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, or had, where such machinery or plant has been manufactured, of such machinery or plant.”
Mere perusal of s. 16(c), quoted supra, would make it manifest that in order to claim development rebate on plant/machinery installed after 31st May, 1974, but before 1st June, 1975, after the issuance of notification dt. 28th May, 1971, it is obligatory upon an assessee to furnish evidence to the satisfaction of ITO that before 1st Dec., 1973, he had either purchased such plant/machinery or had entered into a contract for purchase of such machinery/plant with its manufacturer/owner/dealer. So, what is material and decisive is the date 1st Dec., 1973. The question referred to this Court specifically mentions the date of agreement entered into by assessee with the manufacturer of plant/machinery to be 28th Dec., 1973. Obviously, this date, i.e., 28th Dec., 1973, is subsequent to 1st Dec., 1973, whereas the requirement of s. 16(c) is that, date of agreement must be before 1st Dec., 1973 and not subsequent to 1st Dec., 1973. In this view of the matter and under these circumstances, one of the essential conditions necessary for claiming development rebate provided in s. 16(c) of the Finance Act is not satisfied and hence, assessee was not eligible/qualified to claim the benefit of development rebate by virtue of notification dt. 28th May, 1971. Learned counsel for assessee made attempt to support the view taken by Tribunal by referring to certain dates of supply of machinery/agreement, etc. prior to 1st Dec., 1973. We are afraid we cannot take any other date to be the basis for answering the reference except that date which is specifically mentioned in the question referred, i.e., 28th Dec., 1973. This being a reference made at the instance of Revenue, the assessee cannot ask this Court to take into account any other date for answering the reference except the one which is specifically mentioned by the Tribunal in the question referred supra. It being a settled principle of law that this Court in exercise of powers conferred under s. 256 (1) of the Act cannot travel beyond the terms of the reference nor can amend the question referred, but has to answer the reference on the basis of what is mentioned in the question itself. In this view of the matter, we have to proceed on the basis for answering the question that there was only one agreement entered into by assessee with the manufacturer for supply of plant and machinery on 28th Dec., 1973, with the manufacturer. We cannot take into consideration any other date of agreement even if it existed as contended by learned counsel for assessee for answering the reference.
Learned counsel for the assessee then contended that the view taken by the Tribunal by placing reliance on s. 46 of the Companies Act deserves to be upheld being in accordance with the Companies Act. According to learned counsel when the promoter of company had already entered into an agreement prior to its incorporation and the same was later ratified by the company on its incorporation, the assessee, i.e., company had become entitled to claim the benefit of development rebate in accordance with the requirement of s. 33 ibid. We find no merit in this submission. In the first place, even this submission has to be tested in the context of requirement of s. 16 (c) of the Finance Act. Secondly, whether promoter had entered into an agreement or whether company had entered into such agreement, it is of no significance unless the said agreement satisfies the requirement of s. 16(c), i.e., it must be proved as a fact that such agreement is executed prior to 1st Dec., 1973. Admittedly, in present case the date of agreement, be that by promoter or company, it is dt. 28th Dec., 1973, and hence, the submission does not commend any merit.
16. In view of aforesaid discussion, we answer the question in affirmative and in favour of Revenue and against the assessee. In other words, we answer the question by holding that Tribunal was not justified in holding that assessee is entitled to claim the benefit of development rebate on plant and machinery on the strength of agreement dt. 28th Dec., 1973. No costs.
[Citation : 273 ITR 375]
