TMI Blog1994 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... he development rebate, deduction in respect of which was given in the year 1970-71, amounting to Rs. 11,45,826. It was claimed by the assessee that the development rebate could not be withdrawn because of change of ownership. Having considered the facts, the Tribunal found that whether the whole business was transferred or the individual assets were transferred, the fact that these assets changed hands and got transferred was clear and the change of ownership necessarily attracted the provisions of the Act dealing with the withdrawal of the development rebate granted in earlier years. Learned counsel for the assessee contended that the transfer of the undertaking as a whole cannot be equated with the transfer of specific assets in respect of which deduction on account of development rebate under section 33 of the Act was claimed by the assessee, attracting the provisions of section 34(3)(b) read with section 155(5) of the Act. He further elaborated his contention with reference to other provisions of the Act wherein transfer of assets from a holding company to a subsidiary company or from a subsidiary company to a holding company was treated differently and also to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in clause (b). " Sub-section (3) and sub-section (4) of section 33 read as under: " (3). Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, machinery or plant in respect of which development rebate has been allowed to the amalgamating company under sub-section (1) or sub-section (1A),-- (a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) of section 34 in respect of the reserve created by the amalgamating company and in respect of the period within which such ship, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly: Provided that this clause shall not apply-- (i) where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958; or (ii) where the ship, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or (iii) where the sale or transfer of the ship, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33. " Section 155(5) of the Act reads as under: " 5.Where an allowance by way of development rebate has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified rates with reference to the period in which such asset has been acquired. It may be noticed that no development rebate is allowable in respect of any used ship, machinery or plant except as provided under sub-section (1A) of section 33, which applies to the ship which was not previously acquired by the Indian resident or the assets which were not previously used in India. The other condition for allowing the development rebate is that the assessee has to create a development reserve fund equal to the prescribed per cent. of the development rebate to be actually allowed and is debited to the profit and loss account of the previous year in respect of which such deduction is allowed. Such development reserve has to be utilised by the assessee during the period of eight years next following for the purpose of the business of the undertaking. There is, however, a prohibition that such development reserve cannot be utilised for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. The other condition subject to which development reserve has been put is that the assessee to whom deduction on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition of holding such asset for the remaining period as provided under section 34(3)(b). The period for which the amalgamated company is subject to obligation to fulfil such condition is for the balance of the period which the amalgamated company would have been subjected to, had the assets not been so transferred to the amalgamating company. The other exception is, where a firm is succeeded by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any such assets, the transferee-company is also allowed to retain the benefits of development rebate subject to fulfilling the obligations attached to the allowability of development rebate as in the case of the amalgamation for the remaining period and the restriction on transfer of such assets. However, one significant condition may be noticed that this continuity of benefit is envisaged only in case all the shareholders of the company are the partners of the firm immediately before the succession. If the shareholders of the company consist of partners of the firm from which business is acquired and some other partners also, the condition of section 33(4) is not fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assets during the relevant period. In the aforesaid context it can well be said in the present case that the assessee has lost ownership of the property in question by transfer of the undertaking as a whole which includes transfer of ownership of the assets in question also to the transferee-company. The provision of section 34 of the Act is not confined to transfer by sale necessarily linked with consideration. For attracting the provisions of section 34(3)(b) of the Act, it is enough that the ownership of the assessee in the asset is transferred to any other person subject to the exceptions carved out in the statute at any time before the expiry of the period of eight years. The language used in section 34(3)(b) has been used in the widest possible terms. When it states that "if any ship, machinery or plant 'is sold or otherwise transferred' by the assessee to any person at any time before the expiry of eight years" it cannot be disputed and has not been disputed by learned counsel that the ownership of the concerned plant and machinery has been transferred to the transferee-company even in the case of transfer of the undertaking as a whole. The only condition is that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder which those provisions come into play. As far as the provisions of sections 33, 34 and 155(5) of the Act are concerned, it is the link between the assets and the ownership of the assessee which is relevant. If the link of ownership of the assessee with the assets before the expiry of the period of eight years is snapped unless the case is governed by the proviso to section 34(3)(b) read with section 33(3) and (4) of the Act, it must be deemed that the development rebate for the relevant years was wrongly allowed necessitating the amendment of the assessment of the relevant previous year by having recourse to section 155(5) of the Act. It was then urged by learned counsel for the assessee that as the question whether transfer of the undertaking as a whole attracted the provisions of sections 34(3)(b) and 155(5) of the Act is a debatable issue calling for interpretation of the provisions through long-drawn reasoning the same cannot be made the subject-matter of proceedings under section 154. It is only a mistake apparent from the record that can give jurisdiction to the authority concerned to rectify the mistake by amending the order. Having carefully considered the content ..... 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