Section 33:
Development rebate.
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(1) (a) In respect of a new ship or new machinery or plant (other than
office appliances or road transport vehicles) which is owned by the assessee and is wholly used 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).
(b) The sum referred to in clause (a) shall be—
(A) in the case of a ship, forty per cent. of the actual cost thereof to the assessee;
(B) in the case of machinery or plant,—
(i) where the machinery or plant is installed for the purposes of business of construction,
manufacture or production of any one or more of the articles or things specified in the list in the
Fifth Schedule,—
(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where
it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent. of such cost, where it is installed after the 31st day of
March, 1970;
(ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee
being an Indian company in premises used by it as a hotel and such hotel is for the time being
approved in this behalf by the Central Government,—
(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where
it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent. of such cost, where it is installed after the 31st day of
March, 1970;
(iii) where the machinery or plant is installed after the 31st day of March, 1967, being an
asset representing expenditure of a capital nature on scientific research related to the business
carried on by the assessee,—
(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where
it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent. of such cost, where it is installed after the 31st day of
March, 1970;
(iv) in any other case,—
(a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is
installed before the 1st day of April, 1970, and
(b) fifteen per cent. of such cost, where it is installed after the 31st day of March, 1970.
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(1A) (a) An assessee who, after the 31st day of March, 1964, acquires any ship which before the
date of acquisition by him was used by any other person shall, subject to the provisions of section 34, also be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed,
provided that the following conditions are fulfilled, namely:—
(i) such ship was not previous to the date of such acquisition owned at any time by any person
resident in India;
(ii) such ship is wholly used for the purposes of the business carried on by the assessee; and
(iii) such other conditions as may be prescribed.
(b) An assessee who installs any machinery or plant (other than office appliances or road transport
vehicles) which before such installation by the assessee was used outside India by any other person shall,
subject to the provisions of section 34, also be allowed as a deduction a sum by way of development
rebate at such rate or rates as may be prescribed, provided that the following conditions are fulfilled,
namely:—
(i) such machinery or plant was not used in India at any time previous to the date of such
installation by the assessee;
(ii) it is imported in India by the assessee from any country outside India;
(iii) no deduction on account of depreciation or development rebate in respect of such machinery
or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11
of 1922), or this Act in computing the total income of any person for any period prior to the date of
the installation of the machinery or plant by the assessee;
(iv) such machinery or plant is wholly used for the purposes of the business carried on by the
assessee; and
(v) such other conditions as may be prescribed.
(c) The development rebate under this sub-section shall be allowed as 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.
(2) In the case of a ship acquired or machinery or plant installed after the 31st day of
December, 1957, where the total income of the assessee assessable for the assessment year relevant to the
previous year in which the ship was acquired or the machinery or plant installed or the immediately
succeeding previous year, as the case may be 3
(the total income for this purpose being computed without
making any allowance under sub-section (1) or sub-section (1A) of this section or sub-section (1)
of section 33A or any deduction under Chapter VIA 4
*** is nil or is less than the full amount of the
development rebate calculated 5
at the rate applicable thereto 6
under sub-section (1) or sub-section (1A),
as the case may be,—
(i) the sum to be allowed by way of development rebate for that assessment year 6
under
sub-section (1) or sub-section (1A) shall be only such amount as is sufficient to reduce the said total
income to nil; and
(ii) the amount of the development rebate, to the extent to which it has not been allowed as
aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total
income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil,
and the balance of the development rebate, if any, still outstanding shall be carried forward to the
following assessment year and so on, so however, that no portion of the development rebate shall be
carried forward for more than eight assessment years immediately succeeding the assessment year
relevant to the previous year in which the ship was acquired or the machinery or plant installed or the
immediately succeeding previous year, as the case may be.
Explanation.—Where for any assessment year development rebate is to be allowed in accordance
with the provisions of sub-section (2) in respect of ships acquired or machinery or plant installed in
more than one previous year, and the total income of the assessee assessable for that assessment year
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(the total income for this purpose being computed without making any allowance under
sub-section (1) or sub-section (1A) of this section or sub-section (1) of section 33A or any deduction
under Chapter VI-A
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*** is less than the aggregate of the amounts due to be allowed in respect of the
assets aforesaid for that assessment year, the following procedure shall be followed, namely :—
(i) the allowance under clause (ii) of sub-section (2) shall be made before any allowance
under clause (i) of that sub-section is made; and
(ii) where an allowance has to be made under clause (ii) of sub-section (2) in respect of
amounts carried forward from more than one assessment year, the amount carried forward from
an earlier assessment year shall be allowed before any amount carried forward from a later
assessment year.
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(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) of section 155 shall apply to the
amalgamated company as they would have applied to the amalgamating company had it committed
the default; and
(b) the balance of development rebate, if any, still outstanding to the amalgamating company in
respect of such ship, machinery or plant shall be allowed to the amalgamated company in accordance
with the provisions of sub-section (2), so, however, that the total period for which the balance of
development rebate shall be carried forward in the assessments of the amalgamating company and the
amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the
amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for
the purposes of this section and section 34.
(4) Where a firm is succeeded to 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 ship, machinery or plant, the provisions of
clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this clause shall apply only where—
(i) all the property of the firm relating to the business immediately before the succession
becomes the property of the company;
(ii) all the liabilities of the firm relating to the business immediately before the succession
become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the
succession.
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(5) The Central Government, if it considers it necessary or expedient so to do, may, by notification
in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in
respect of a ship acquired or machinery or plant installed after such date, not being earlier than three years
from the date of such notification, as may be specified therein.
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(6) Notwithstanding anything contained in the foregoing provisions of this section, no deduction by
way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st
day of March, 1965, in any office premises or any residential accommodation, including any
accommodation in the nature of a guest-house:
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Provided that the provisions of this sub-section shall not apply in the case of an assessee being an
Indian company, in respect of any machinery or plant installed by it in premises used by it as a hotel,
where the hotel is for the time being approved in this behalf by the Central Government.
Notes:
1. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for sub-section (1) (w.e.f. 1-4-1968).
2. Ins. by Act 5 of 1964, s. 8 (w.e.f. 1-4-1964).
3. Ins. by Act 20 of 1967, s. 33 and the third Schedule, for certain brackets, words, figures and letters (w.e.f. 1-4-1968).
4. The words, figures and letter “or section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988).
5. Subs. by Act 5 of 1964, s. 8, for “at the rate applicable thereto under that sub-section” (w.e.f. 1-4-1965).
6. Subs. by s. 8, ibid., for “under sub-section (1)” (w.e.f. 1-4-1965).
7. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for certain brackets, words, figures and letters (w.e.f. 1-4-1968).
8. The words, figures and letter “or section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988).
9. Subs. by Act 20 of 1967, s. 9, for sub-section (3) (w.e.f. 1-4-1967).
10. Ins. by Act 5 of 1964, s. 8 (w.e.f. 1-4-1964).
11. Ins. by Act 10 of 1965, s. 8 (w.e.f. 1-4-1965).
12. Ins. by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968).