Circular No. 170

What it does

Treats producer gas-fired kilns and furnaces as coal-fired equipment for the extended development rebate. Notification S.O. 2167, dated 28-5-1971 had stopped development rebate under section 33 on a ship acquired or machinery or plant installed after 31st May, 1974, but section 16 of the Finance Act, 1974 kept the rebate alive for coal-fired equipment, and for plant converting oil-fired equipment into coal-fired equipment, installed after 31st May, 1974 but before 1st June, 1977, the Explanation to section 16(b) reading 'equipment' as including a boiler, furnace, kiln, oven or the like. The Board, advised that producer gas is made by passing steam over burning coal, holds that a producer gas-fired kiln or furnace is coal-fired equipment within that Explanation, so the extension applies to it as well.

Why it was issued

The Board examined whether a producer gas-fired kiln or furnace can technically be regarded as coal-fired equipment for section 16 of the Finance Act, 1974.

Who it reaches

Manufacturers installing producer gas-fired kilns and furnaces
Assessees converting oil-fired equipment to coal
Assessing Officers allowing development rebate after the cut-off

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.16	s.19
s.33	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

273. Continuation of development rebate in certain cases - Explanation to section 16(b) of the Finance Act, 1974 - "Coal-fired equipment" includes producer gas plants
1. Reference is invited to Notification No. SO 2167, dated 28-5-1971 [printed above], of the Government of India, Ministry of Finance (Department of Revenue & Insurance), under which the deduction in respect of development rebate under section 33 was not to be allowed in respect of a ship acquired or machinery or plant installed after May 31, 1974. However, section 16 of the Finance Act, 1974 provided that the said Notification shall not apply, inter alia, in respect of any machinery or plant being coal-fired equipment or any machinery or plant for converting oil-fired equipment into coal-fired equipment, installed by any assessee after May 31, 1974, but before June 1, 1977. The term "equipment" has been explained to include a boiler, furnace, kiln, oven or the like.
2. I am directed to say that the Board had occasion to examine whether producer gas-fired kiln, furnace, etc., can technically be regarded as coal-fired equipment and thereby covered within the meaning of section 16 of the Finance Act, 1974. The Board is advised that producer gas is produced by passing steam over burning coal and in view thereof producer gas-fired kiln, furnace, etc., can be regarded as coal-fired equipment within the meaning of the Explanation to section 16(b) of the Finance Act, 1974. Accordingly, the provision in section 16 of the Finance Act, 1974 relating to extension of development rebate in respect of coal-fired equipment will apply to producer gas-fired kiln, furnace, etc., as well.
Circular : No. 170 [F. No. 202/35/75-IT(A-II)], dated 30-6-1975.

What to watch

The installation window in section 16 is the constraint: after 31st May, 1974 but before 1st June, 1977, and that period has long passed.
The reasoning rests on producer gas being made from burning coal; equipment fired by gas from another source is not covered by it.
Development rebate under section 33 has since gone in terms this text does not carry.

Where you meet it

In an old assessment where development rebate on a producer gas-fired kiln or furnace installed in the mid-1970s is disallowed.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 119 — Amendment of the Income-tax Rules under section 10 of the Income-tax Act, 1961 12 May 2006
Notification No. 13 — A notification under section 16 of the Income-tax Act, 1961 12 January 2004
Notification No. 12 — Amendment of the Income-tax Rules under section 16 of the Income-tax Act, 1961 12 January 2004
Circular No. 654 — Financial Year 1993-94 22 July 1993
Circular No. 629 — Financial Year 1992-93 31 July 1992
Circular No. 537 — Financial Year 1989-90 12 July 1989

← Circular No. 172 · Circular No. 169 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is