Satish Chandra, C.J. - (1.) THIS reference relates to the assessment years 1966-67 and 1967-68. The Tribunal has referred three questions of law for our opinion. The first question relates to the taxability, of receipts of money for surrender of import entitlements. In Agra Chain Manufacturing Co. v. CIT [1978] 114 ITR 840 (All), it was held that such receipts are revenue in nature. Hence, this question is to be answered against the assessee. The second question relates to payments of damages on arrears of provident fund contributions. THIS question also stands concluded against the assessee by a Full Bench decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All) [FB]. The third question relates to the allow-ability of the development rebate on items of plant and machinery costing less than Rs. 750 each under Section 33(1)(b) of the I.T, Act, 1961. On this question, the Tribunal found that the entire cost of these plants and machinery was allowed because of a specific provision for allowing such a rebate in case the cost is less than Rs. 750 but it was not allowed as a revenue expenditure. These constitute capital assets the actual cost of which remained the same despite their value having been allowed as a deduction. It was also found that the assessee had created the requisite development rebate reserve. It concluded that, in view of the clear provisions of Section 33(1)(b), development rebate was allowable despite the fact that the entire cost had been allowed by way of deduction.
(2.) IT has not been doubted before us that the items in question were the capital assets of the assessee. The assessee had created the requisite development rebate reserve in respect of them. The fact that their cost had been allowed as a whole by way of deduction but not as a revenue expenditure does not make the actual cost of the asset nil. The actual cost of the asset remains the same for calculating the development rebate reserve. We are hence in agreement with the Tribunal that the assessee was entitled to the development rebate on such items of capital assets. The third question is hence liable to be answered in favour of the assessee. We, therefore, answer the first and second questions in favour of the department and against the assessee and the third question in favour of the assessee and against the department. In view of the divided success there will be no order as to costs.;