TMI Blog1993 (4) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 dated 17-7-1986 : Assessment year 1982-83 to the effect that the assessee-hotel therein was not entitled to extra depreciation, required reconsideration. They, therefore, placed this appeal before the President of the Income-tax Appellate Tribunal with a request to constitute a larger Bench. It is in these circumstances that this appeal has come up before this Bench of three Members. 3. The assessee, a company in which public are substantially interested, runs a hotel called "Hotel Taj Coromandel" at Madras. The assessment year is 1983-84, the year of account ending on 30-6-82 being the relevant previous year. 4. For the said assessment year, the assessee originally filed a return of income on 28-6-83, declaring an income of Rs. 73,70,688 "subject to carry forward of unabsorbed losses, depreciation and development rebate and investment allowance". Sometime in September 1983, the assessee filed a revised return of income, disclosing this time an income of Rs. 64,18,931 subject to set off of past losses, depreciation, etc. 5. In the said revised return, the assessee had claimed depreciation allowance in an aggregate sum of Rs. 34,04,032, as detailed below: Rs. Normal dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The CBDT has not issued any circular authorising the withdrawal of extra depreciation allowance to authorised hotels on the ground that development rebate was withdrawn. Extra Shift Allowance : The plant and machinery was put to use round the clock and therefore, under Appendix I Part I item III(iv), the assessee was entitled to triple shift allowance. 9. In the short order in revision passed by him, the Commissioner of Income-tax rejected both the claims of the assessee in the following words "3 . .................................. It is well established in law that merely because a hotel has been approved by the department of tourism, it should be entitled (sic) to extra depreciation. The approval is not for allowance of extra depreciation under section 33 since the allowance of development rebate itself has been abolished with effect from 1-6-74 and the approval given in that connection cannot be projected to extra depreciation. 4. The very same point has been held by the Income-tax Appellate Tribunal in favour of department In a number of cases. 5. I am, therefore, satisfied that the IAC's action In allowing the expenses (sic) detailed above is prejudicial to the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act. Therefore, the grant of extra depreciation allowance does not depend upon the grant of development rebate. For a fact, even as late as in November 1985, the stand of the Govt. was that extra depreciation allowance was one of the incentives offered by it to the private sector to attract private sector investment in tourism infrastructure - see reply to Lok Sabha Question No. 37 (pp. 11 to 14 of the paper-book filed on behalf of the assessee). 12. To a specific query in this regard from the Bench, Sri Ramamani stated that the Govt. of India, Ministry of Finance (Department of Revenue Insurance) Notification No. SO 2167 of May 28, 1971 which came to be issued under the provisions of sec. 33(5) and which withdrew development rebate from a specified date, did not amount to the deletion, in toto, of section 33 itself. That section was allowed to remain on the statute book for such purposes as withdrawing development rebate earlier granted, in the event of the assessee's contravening the conditions on which development rebate came to be granted originally. 13. Sri Ramamani next contended that the CBDT had at no point of time issued any circular to the effect that with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax has taken the line that, with the withdrawal of development rebate, extra depreciation allowance also stood withdrawn simultaneously. It is the validity of the said conclusion that falls to be considered in this case. 20. Now, development rebate was introduced by the Finance Act, 1955, with effect from 1-4-1955; that is to say, even under the old Act, development rebate was being granted. The scheme of granting development rebate was continued in the new Act also. Finance Act, 1964 inserted sub-section (5) to section 33 with effect from 1-4-1964. By the said sub-section, the Central Govt. assumed powers to withdraw development rebate by giving a clear three-year notice of its intention to withdraw development rebate. Finance Act, 1965 inserted sub-section (6) to section 33. The effect of this sub-section was that no deduction by way of development rebate shall be allowed in respect of any plant or machinery installed after 31-3-65 in any office premises or any residential accommodation including any accommodation in the nature of a guest house. We then have Finance (No. 2) Act, 1967, which gave a package of tax concessions to hotels, as an integral part of the large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. In other words, the eligibility conditions for the grant of development rebate on the one hand, and of extra depreciation allowance on the other, are identical. This fact alone, without anything more, cannot lead to the conclusion that the withdrawal of development rebate will necessarily mean the simultaneous and automatic withdrawal of extra depreciation allowance also. Both in law and in logic we would be justified in holding that the assessee was earlier entitled both to development rebate and extra depreciation allowance, because it satisfied the common eligibility conditions, that even after the withdrawal of development rebate, the assessee continued to satisfy the common eligibility conditions; and that, therefore, it was entitled to extra depreciation allowance, the withdrawal of development rebate notwithstanding. 24. There is yet another point that is noteworthy. The commonality of conditions noticed in relation to development rebate [sec. 33(1)(b)(B)(ii] and extra depreciation allowance [Appendix I Part I item III(iii) of the IT Rules, 1962] is not restricted to these two allowances alone. As one scans the Scheme of the Act particularly as respects the tax conces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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