TMI Blog1990 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... r expending labour thereon, converted the raw materials so received into various automobile components and ancillaries and supplied them to Enfield India Ltd. in respect of the assessment years 1969-70 to 1971-72, the assessee claimed development rebate under section 33(1)(b)(B)(i)(a) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the higher rate of thirty-five per cent., on the machinery used by it in the manufacture of automobile ancillaries falling within item No. (20) of the Fifth Schedule to the Act. Initially, in respect of the assessment years in question, the Income-tax Officer allowed development rebate as claimed by the assessee, but, later, it was found that development rebate in excess of the admissible r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even so, the Tribunal found that as the assessee had not purchased any raw material at all and the raw materials handed over to it by Enfield India Ltd. were worked upon by the assessee and handed over back to the company and the materials remained the property of the company, the assessee would only be in the position of a bailee and, therefore, the assessee would not be entitled to claim higher development rebate at thirty-five per cent. In these references under section 256(2) of the Act, the following common question of law has been referred to this court for its opinion : "Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the assessee was not entitled to development rebate at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and subjecting the raw materials received by it to several processes, the assessee had turned out automobile ancillaries and supplied them to Enfield India Ltd. The requirement under section 33(1)(a) of the Act is that the machinery owned by the assessee should have been wholly used for the purposes of business carried on by it. During the assessment years in question, it is not in dispute that the assessee had wholly used its machinery for purposes of the business carried on by it, viz., making of automobile ancillaries and supplying them to Enfield India Ltd. Further, the machinery installed in the factory of the assessee could be used only for carrying out the manufacture of automobile ancillary components and this is also not in contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any the less manufactured products. If, even according to the view so taken by the Tribunal, the assessee had manufactured automobile ancillaries falling under item (20) of the Fifth Schedule to the Act with the use of its machinery and wholly using such machinery for the purpose of the business carried on by it, then, we do not see how the assessee could be denied the benefit of development rebate at a higher rate. We are of the view that the event for claiming development rebate at a higher rate is the use of machinery owned by the assessee and installed before April 1, 1970, for the purpose of the business carried on by it in the manufacture or production of automobile ancillaries falling under item No. (20) of the Fifth Schedule to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture or production of automobile ancillary components in the course of carrying on its business and that has been fully satisfied in this case. We may also observe that in Empire Industries Ltd. v. Union of India [1986] 162 ITR 846, the Supreme Court, considered the question whether subjecting cotton fabrics to processes like bleaching, mercerising, dyeing, printing, water-proofing, etc., would amount to manufacture for purposes of levy of duty under the provisions of the Schedule to the Central Excises and Salt Act, as it stood prior to the amendment in 1980. In repelling an argument that what was carried on by the petitioners was only a processing activity and that they are not the owners of the goods, the Supreme Court pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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