- (1.) The assessee respondent manufactures nuts, bolts and screws for automobiles which fall under Item No. 20 in the Fifth Schedule being automobile ancillaries. According to the appellant the machinery which was installed was being used not only for the manufacture of items falling in the Fifth Schedule but also for the manufacture of some other items. Whereas the respondent had claimed allowance on development rebate in respect of assessment year 1969-70 at the rate of 35%, the Income-tax Officer held that inasmuch as the machinery was also being used for the manufacture of some other items not falling under the Fifth Schedule, therefore, the rate of development rebate should be restricted to 20% only.
(2.) Being aggrieved the respondent succeeded in the appeal filed before the Appellate Assistant Commissioner. The department filed an appeal to the income-tax Appellate Tribunal which, however, upheld the assessees contention. At the instance of the department the Tribunal referred the following question of law to the High Court. Whether, in the assessment for the assessment year 1969-70, the assessee could be allowed development rebate at 35% on Rs. 2,30,840 being the cost of the machinery installed during the relevant previous year, despite the fact that they were used not merely for the manufacture of nuts, bolts and screws for automobiles but also for the manufacture of such articles for other machinery
(3.) The High Court answered the question of law in favour of the respondent by observing that the machinery which was installed was used wholly for the purpose of business of the assessee. This is a fact which had been found by the Tribunal. The High Court, further observed that the machinery installed for the purpose of manufacture of one of the items mentioned in the Fifth Schedule need not necessarily be used exclusively for the manufacture of those items or any of the items in the Fifth Schedule. It accordingly answered the question of law in favour of the Respondent.;