Tarapore and Co. (Cochin) vs Commissioner of Income Tax

Ramanujam, J.—The assessee in this petition field under s. 256(2) of the I.T. Act, 1961, seeks a direction to the Tribunal from this court to

refer the following two questions :

(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is not entitled to higher

development rebate u/s 33(1)(B)(i)(b) of the Act ?

(2) Whether, on the facts and in the circumstances of the case, the plant and machinery installed by the assessee was not plant and machinery

installed for the purpose of business of construction of ships ?

The assessee is a firm carrying on business as contractors for the construction of building docks and repairing docks. For the assessment year

1975-76, it claimed higher development rebate at the rate of 25% under s. 33(1)(B)(i)(b) of the I.T. act, in respect of the machinery installed by it,

on the ground that the machinery and plant was installed and used for the purpose of construction, manufacture and production of ships, which is

one of the items specified in the Fifth Schedule. The ITO, however, did not accept the claim of the assessee on the ground that though the assessee

was engaged in the construction of a shipyard and the plant and machinery was used by it in that work, yet it was ineligible for development rebate

at the higher rate, as the plant and machinery owned by the assessee had not in fact been used for the manufacture and production of a ship and

that the production of a ship was actually done by others and not by the assessee. On appeal by the assessee to the Commissioner of Income Tax

(Appeals), the order of the ITO was upheld. On further appeal to the Tribunal, the Tribunal held that development rebate at 25% is available

where plant and machinery is installed for the purpose of construction, manufacture and production of any one or more of the articles or things

specified in the Fifth Schedule, that the assessee has only undertaken to construct or repair the dockyard and, therefor, it cannot be regarded as

having been engaged in the construction, manufacture and production of a ship and that, therefore, the claim of the assessee for a higher

development rebate is not acceptable. The view taken by the Tribunal is sought to be challenged by the assessee by seeking this reference.

We are of the view that on the findings rendered by the Tribunal, its decision cannot be taken exception to. As already stated, the assessee is

engaged in the execution of civil contracts and one of the works undertaken by it is to repair or construct a dockyard. The repair or construction of

a shipyard cannot amount in any sense to manufacture or production of a ship. Even assuming that the plant and machinery owned by the Assessee

has been used only in the construction of the shipyard, the question is whether the assessee is using the plant and machinery for the manufacture or

production of any other article referred to in the Fifth Schedule. The learned counsel for the assessee would say that very many articles referred to

in the Fifth Schedule have been used by the assessee in the construction and repair of the shipyard and such user will enable the assessee to claim

the benefit of s. 33(1)(B)(i)(b) of the Act. We do not see how the user of the articles referred to in the Fifth Schedule will enable the assessee to

claim the benefit of the said provision. Under the said provision, an assessee can claim the benefit of higher development rebate only if the plant

and machinery owned by it is used for the manufacture and production of any of the articles referred to in the Fifth Schedule in the repair of

construction of a shipyard will not enable the assessee to claim higher development rebate. If the assessee''s contention that the user of any of the

articles referred to in the Fifth Schedule in the assessee''s business should be taken to enable it to claim relief under s. 33(1)(B)(i)(b) is accepted, it

will be clearly a misleading of the section. As stated already, the section contemplates higher development rebate only if the plant and machinery

has been used for the manufacture or production of any one of the articles contained in the Fifth Schedule. It does not contemplate a mere use of

any of the articles in the Fifth Schedule in connection with the assessee''s business. In this view of the matter, the decision of the Tribunal is

consistent with the scope of s. 33(1)(B)(i)(b) of the I.T. Act. We, therefore, do not see any justification for directing a reference. The petition is

dismissed and there will be no order as to costs.