TMI Blog1980 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... and (20) of the Fifth Schedule to the Income-tax Act, 1961, the Tribunal is right in holding that the assessee is entitled to deduction under the said section 80E in respect of its profits and gains attributable to its manufacture or production of all the automobile ancillaries including those utilised by it in its own manufacture of cars ? 2. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the provisions of section 33(1)(iii)(c)(A)(a) of the Income-tax Act, 1961, the Appellate Tribunal is justified in holding that the assessee is entitled to development rebate at 35% on the cost of the machineries newly installed for the manufacture of automobile ancillaries, irrespective of whether the ancillaries so manufactured were sold by the assessee to outside parties or were utilised by it in its own manufacture of cars ? " The assessee is M/s. Hindusthan Motors Ltd. and is engaged, inter alia, in the manufacture of motor cars. The assessment years involved are 1965-66 and 1966-67. In order to determine the questions involved for the assessment year 1965-66, it has to be borne in mind that the assessment was governed by the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the manufacture of motor cars and manufacture of automobile ancillaries. It also claimed higher development rebate under s. 33(1)(iii)(c)(A)(a) of the I.T. Act, 1961, on new machineries installed for the manufacture of automobile ancillaries. The ITO allowed the claim for deduction under s. 80E only in so far as that claim related to the profits and gains arising out of the automobile ancillaries by the assessee and rejected the claim in so far as it related to profits and gains relatable to the manufacture of cars and manufacture of automobile ancillaries used by the assessee in its own manufacture of cars. Further, the ITO did not allow the higher development rebate of 35% claimed by the assessee under s. 33(1)(iii)(c)(A)(a) of the I.T. Act, 1961, on the cost of the machineries newly installed for the manufacture of automobile ancillaries. The assessee preferred appeals before the AAC against the assessments for the assessment years 1965-66 and 1966-67. The AAC disposed of the appeals for two assessment years 1963-64 and 1964-65, by a common order. He held so far as these grounds are concerned, inter alia, as follows: " Motor car has not been included in the list of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in its own manufacture. Supposing the assessee would have limited its activities only to the manufacture of ancillaries and would have transferred all the products to another company which would have solely devoted itself to the assembling of cars, then it would have been entitled to the higher rebate ; we do not think that the Legislature would have left such a big loophole in the I.T. Act. That being the position we are of the considered opinion that the assessee is entitled to a higher rebate on all its automobile ancillaries including those utilised by it in the assembling of its own cars. The last contention for the assessment year 1966-67 relates to the claim of higher development rebate on new machineries installed for the manufacture of automobile ancillaries. This issue is intimately related to the claim of higher rebate as discussed above. The Appellate Assistant Commissioner has also dealt with this point along with the first issue. The Income-tax Officer did not allow the higher rebate of 35% as laid down in section 33(1)(iii)(c)(A)(a) as he was of the opinion that the machinery or plant on which the claim was made was installed for the purposes of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits and gains attributable to the business of generation or distribution of electricity or of construction, manufacture or production of any one or more of the articles or things specified in the list in Part 11I of this Schedule (i) on so much of the profits and gains aforesaid as do not exceed Rs. 10 lakhs. (ii) on the balance of the profits and gains aforesaid. Column 3 Rate of rebate (i) 35 per cent. (ii) 26 per cent. Similarly, s. 80E provides as follows: " 80E. Deduction in respect of profits and gains from specified industries in the case of certain companies.-(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. (2) This section a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate as contemplated under the section. The assessee is also carrying on the operation or the manufacture of automobile ancillaries and the total profits and gains of the assessee were attributable to some of the operations being carried out in production and manufacture of automobile ancillaries. If that is the position, then, the very fact that the assessee was using part of the automobile ancillaries produced by it and used for itself and not for sale to the market separately would not deprive the assessee of the relief granted on the plea that one could not trade with oneself or earn any profit in respect of transaction with oneself. Learned advocate for the revenue drew our attention to the various authorities which held that one could not trade with oneself and as such contended that any part which was attributable out of the transaction of the assessee should not be entitled to relief. We are unable to accept this position. It is not a question whether the assessee carries on trade with itself. The assessee is carrying on business of earning the profit and one of the operations the assessee is carrying on is the production and the manufacture of automobile ancillaries. If a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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