TMI Blog1987 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings observed that the assessee had claimed a sum of Rs. 2,69,230 by way of rehabilitation allowance under section 33B. He made detailed enquiries from the assessee in support of its claim. After doing so he concluded that the assessee was not entitled to the deduction inasmuch as various conditions envisaged by the section were not satisfied. The detailed reasoning of the ITO in rejecting the claim is recorded as under : " The assessee has claimed rehabilitation allowance u/s 33B to the tune of Rs. 2,69,230. A detailed calculation how the figure has been arrived is given in the statement filed along with the return of income. It is argued by Shri J.J. Rayani that on account of flood, the assessee's factory was damaged and hence the assessee's case falls under provisions of section 33B of the I.T. Act. (i) As regards method of computation of allowance, it is explained by Shri J.J. Rayani that some of the assets of factory were totally destroyed and washed away in flood. Accordingly, these assets were written off and terminal loss u/s. 32(i)(iii) to the tune of Rs. 62,300 is claimed. Thus the assessee has claimed investment allowance at the rate of 60% of the terminal loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has not also followed the method of calculation of rehabilitation allowance as laid down under this section. As stated above, the assessee does not fulfill any of the conditions as laid down under the section hence the assessee's claim of rehabilitation allowance u/s. 33B is negatived." 3. The CIT(A) however accepted various contentions of the assessee and allowed the claim under section 33B. In doing so he observed as under : " The next ground is with regard to the claim of the assessee made under sec. 33B. The ITO has stated that in his assessment order that the conditions as laid down as per the provisions of sec. 33B of the Act are not satisfied in the case of the assessee. Therefore, he has rejected the claim of the assessee-company. The learned counsel, on the other hand, has urged that the ITO has again failed to appreciate the facts of the present case inasmuch as extensive damage to the building and the machinery has caused because of the floods which took place in Morvi in the month of August 1979 and assessee is entitled to deduction under s. 33B as also it is entitled to a claim under s. 80J. The learned counsel has also relied upon a comparable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order dt. 16-8-1984 has allowed the claim under s. 33B. Since the facts of assessee-company are similar to that obtained in the case of M/s. Super Scientific Clock Mfg. Co. of Morvi, I hereby direct the ITO to allow the claim of deduction under s. 33B. However, the assessee-company has made a claim at Rs. 2,69,230. The assessee has worked out the written down value at Rs. 4,83,021 and the deductions available @ 80 per cent of the same has been taken and claimed. However, this estimate is on the high side. In my opinion 60 per cent of such written down value would be the reasonable amount instead of the estimate made by the assessee at 80 per cent. Therefore, the working for arriving at the figure of allowable rehabilitation allowance under s. 33B is as under : Rs. (i) Written down value (after excluding the assets written off) 4,83,021 (ii) 60 per cent of the same 2,89,812 (iii) 60 per cent of this amount is eligible for claim as rehabilitation allowance under sec. 32(1)(iii) 1,73,886 (iv) (a) The terminal allowance of the value of the assets written off eligible under s. 32(1)(iii) Rs. 62,300 (b) 60 per cent of this amount is Rs. 37,380 37,380 -------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually used ' in the legislation and what was unexpressed had the same value as to what was unintended. For these propositions he relied on the following decisions - Swadeshi Polytex Ltd. v. ITO [1981] 127 ITR 287 (All.) at page 295, CED v. Amarlal [1984] 147 ITR 243 (Mad.) and Vidarbha Co-op. Marketing Society Ltd. v. CIT [1985] 156 ITR 422 (Bom.). It was accordingly urged that the order of the ITO be restored. 6. The learned counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). According to him, the floods in August 1979 had resulted in extensive damage to the factory premises as well as machineries. According to him, the assessee could not resume its business for a period of 6 to 7 months and the same remained discontinued. He also supported the order of the CIT(A) in respect of the deduction which had been allowed in respect of assets other than those on which deduction had been allowed under section 32(1)(iii). In support of his arguments he referred extensively to the paper book filed by him running into 76 pages. Reliance was also placed by him on the following decisions : (i) CIT v. Engg. Works of India (P.) Ltd. [1977] 108 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Explanation : In this section, ' industrial undertaking ' means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining." The aforesaid section was introduced with a view to providing some sort of a relief to the assessees who had suffered extensive damage to the building, machinery, plant etc. as a result of natural calamities. Admittedly during the year under consideration there were floods in Morvi where the industrial undertaking of the assessee is located it is obvious that there was a dislocation in the working as a result of the floods and also that the damage was caused to the factory building as well as other fixed assets. We have however to examine whether there was a " discontinuance of business " within the meaning of section 33B, as also the fact whether " extensive " damage had been caused as a result of the floods which took place in Morvi on 11-8-1979. 9. A perusal of the assessment order shows that the assessee claimed a sum of Rs. 4,04,623 under the head " Flood Rehabilitation Account ". Out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year had progressed only for a period of six weeks. The learned counsel for the assessee has stated that the business was re-commenced after a period of 7 to 8 months which would mean somewhere in March, 1980. In other words the working operations have been only for a period of five months out of 12 months. According to us, the word " discontinued " would also mean complete stoppage for some time which may not necessarily be very long. There is no doubt that the provisions of the section allow an assessee to restart operations within a period of three years from the end of the previous year. This however does not mean that there is any bar to re-commence earlier than that. 12. A perusal of the P L Account placed on the paper book further shows that the sales of the assessee have come down to a figure of Rs. 33.39 lacs as against the figure of Rs. 53.52 lacs in the immediately preceding year. In other words the entire operations of the assessee were affected by the floods. 13. We are accordingly of the view that the assessee is entitled to the deduction u/s. 33B in respect of Rehabilitation allowance since according to us various conditions laid down by the section a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As discussed above, the assessee company's claim of deduction u/s. 33B is negatived as the conditions laid down in this section have not been fulfilled by the assessee company. Accordingly, when the assessee's case does not fall under the purview of section 33B of IT Act, they are not entitled to benefit of the proviso to section 80J(4). In view of the above, the assessee company's claim u/s. 80J is also negatived. " 16. The CIT(A) however accepted the claim of the assessee and in doing so observed as follows : " The next point is with regard to the claim made under sec. 80J. The claim under sec. 80J is consequential to the allowance allowable under s. 33B. As it has been held that the assessee is entitled to deduction under s. 33B, as per the Explanation to s. 80J(4) the assessee is entitled to a claim u/s. 80J. The claim in this respect has been made at Rs. 68,900. The assessee has worked out the written down value of the assets and current value of the liabilities etc. The ITO is hereby directed to verify the correctness of the working given by the assessee company for the claim made under sec. 80J. As stated above, the assessee is entitled to deduction under sec. 80J ..... X X X X Extracts X X X X X X X X Extracts X X X X
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