Commissioner of Income Tax vs Northern India Iron and Steel Co. Ltd.

In respect of the assessment year 1974-75, at the instance of the Revenue, the following two questions have been referred for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the lease money received by the assessed during the assessment year 1974-75 was assessable u/s 28 and not u/s 56 of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee-company was entitled to development rebate and deduction u/s 80J of the Income Tax Act, 1961 ?"

In so far as question No. 1 is concerned, relying upon the order of the Tribunal in the case of the assessed for the assessment years 1971-72 and 1972-73, the Tribunal held that the income of the assessed from lease rent should be taxed u/s 28 of the Income Tax Act, 1961, under the head "Business". Consequent upon this finding, the Tribunal further held that the Appellate Assistant Commissioner was justified in giving a direction to allow development rebate and deduction u/s 80J of the Act. The case of the assessed pertaining to the assessment year 1971-72 is the subject-matter of a decision of this court in Commissioner of Income Tax Vs. Northern India Iron and Steel Co. Ltd., one of us (D.K. Jain J.), was a member of the Bench deciding the said case. Following that decision, question No. 1 is answered in the affirmative in favor of the assessed and against the Revenue.

Question No. 2 deals with entitlement of the assessed to be granted development rebate and also deduction u/s 80J of the Act. In so far as the claim of development rebate is concerned, it is concluded against the assessed in the aforesaid case pertaining to the year 1971-72. Regarding the claim for deduction u/s 80J it has been found in the aforesaid cited decision that since the machinery was let out the lessee had control over the use of the machinery and the assessed had no control over its user. Under sub-section (4) of section 80J, one of the conditions which the assessed is required to fulfill for claiming rebate is that it manufactures or produces articles. In view of the aforesaid finding that the assessed had no control over the machinery, the question of grant of rebate u/s 80J does not arise because it cannot be said that the assessed manufactures or produces articles. In this view, question No. 2 is answered in the negative, in favor of the Revenue and against the assessee.