BALDEVJI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER the scheme of the Income-tax Act, 1961, development rebate like depreciation allowance in respect of plant and machinery is a capital allowance granted to a taxpayer in the computation of annual profits and gains under the head "Business". Unlike depreciation allowance, however, development rebate is an "once and for all" allowance in the year of installation of the plant and machinery. The statute lays down certain conditions for the grant of development allowance. The first condition obviously is that the assessse must be the owner of the machinery or plant in respect of which development rebate is to be granted. The other condition which can be gathered from the provisions of the Act is that the assessee should continue to retain ownership of the machinery for at least eight years immediately following the year of installation. The sanction for the latter condition is that if an assessee should part with the machinery in question within the statutory period, then he forfeits the development rebate already granted. The procedure by which the forfeiture is effectuated by the Act is to be found in section 155(5) of the Act. The provision enables the Income-tax Officer to withdraw development rebate already granted to an assessee, if within the statutory period, the assessee either sells or otherwise transfers the machinery which had obtained development rebate, as if the grant of the development rebate, even in the first instance, is a palpable mistake in the assessment.

(2.) THE only question in this reference before us is whether the assessee in this case has rendered himself liable to forfeiture of the development rebate under section 155(5) of the Act.

(3.) APART from the inherently wide connotation which the expression "transfer" bears practically in any legal discussion, there is also a further indication in section 155(5) itself that Parliament intended the term "transfer" to be understood in the widest sense possible. This is seen from the collocation of the expression "sold or otherwise transferred". The transfers, as it were, are divided into two categories, sales and non-sales. The expression "otherwise" exhausts all the categories of transfers other than sales which are transfers of a kind for consideration. The expression "otherwise" occurring in a combination of words has sometimes been regarded as indicating the application of the ejusdem generis rule. For instance, the expression "contract or otherwise" occurring in section 10 of the Estate Duty Act, 1953, was interpreted by courts to mean either a sale or something akin to a sale. See Attorney-General v. Seccombe [1911] 2 KB 688 and George Da Costa v. CED . This interpretation of the expression "otherwise" can, however, be explained by reference to the particular context of the estate duty provisions, and also, presumably, by the court's disinclination to give a wider berth than wa felt absolutely necessary to give effect to an anti-tax avoidance provision like section 10 of that Act. In construing the expression "sold or otherwise transferred" occurring in section 155(5) of the Income-tax Act, however, we are under no such compulsion or restriction. This is because the subject and context of section 155(5) clearly point to the intention of Parliament that the machinery which has obtained a grant of development rebate by reason of its having come under the ownership of the assessee should continue to remain in the same ownership and should not be parted with by him for a period of at least eight years from the date of installation. In this context, therefore, any parting with that asset would involve a breach of the statutory condition subject to which alone development rebate is originally granted. It stands to reason, therefore, that the expression "otherwise transferred" must be given such wide amplitude of meaning as is consistent with its ordinary connotation. There can be no warrant for cutting down that meaning, to any extent.