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1991 (5) TMI 40 - HC - Income TaxDevelopement Rebate, Instructions By IAC U/S 144-B, Provision For Gratuity, Unabsorbed Development Rebate
Issues Involved:
1. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act. 2. Adjustment of development rebate and relief under section 80J for the assessment year 1976-77. 3. Deduction of the provision for gratuity. Detailed Analysis: Point No. 1: Jurisdiction of the Commissioner of Income-tax under section 263 The first issue pertains to whether the Commissioner of Income-tax had jurisdiction under section 263 of the Income-tax Act to revise the order of the Income-tax Officer, especially since the order was scrutinized by the Inspecting Assistant Commissioner under section 144B. The Tribunal held that the assessment order in question is indeed an order passed by the Income-tax Officer, and thus, the Commissioner of Income-tax cannot be denied jurisdiction under section 263 on the ground that the assessment order was made based on the directions issued by the Inspecting Assistant Commissioner. The court concurred with this view, affirming that the final order passed by the Income-tax Officer does not cease to be an order passed by him and remains revisable by the Commissioner. This conclusion is supported by various precedents, including CIT v. Vithal Textiles [1989] 175 ITR 629 (MP) and CIT v. Christian Mica Industries Ltd. [1979] 120 ITR 627 (Cal). Consequently, the court answered question No. 1 in Income-tax Reference No. 417 of 1982 in the affirmative, against the assessee and in favor of the Revenue. Point No. 2: Adjustment of Development Rebate and Relief under Section 80J The second issue involves whether the adjustment of development rebate relating to the assessment year 1967-68 and the relief under section 80J relating to the assessment year 1971-72 could be allowed for the assessment year 1976-77. The court noted that from the assessment year 1967-68 till 1976-77, the assessee-company incurred only losses. Due to a change in the accounting year allowed by the Income-tax Officer, there was no previous year for the assessment year 1975-76, and the proceedings were closed as "N. A." (nil assessment). The crux of the issue was the interpretation of the words "immediately succeeding" in sections 33(2) and 80J(2). The court held that the words should be taken in their natural sequence without reference to a particular assessee or situation. Therefore, the 8th assessment year for the development rebate and the 4th assessment year for the section 80J relief would be 1975-76, not 1976-77. This interpretation was supported by the Madras High Court decision in Rockweld Electrodes India Ltd. v. CIT [1990] 185 ITR 62. Consequently, the court answered questions Nos. 2, 3, and 4 in Income-tax Reference No. 417 of 1982, and questions Nos. 1, 2, and 3 in Income-tax Reference No. 375 of 1985 in the affirmative, against the assessee and in favor of the Revenue. Point No. 3: Deduction of the Provision for Gratuity The third issue concerns the claim for deduction of the provision for gratuity. The assessee made a provision for payment of gratuity in the sum of Rs. 2,54,452, but the gratuity fund itself was created only on December 30, 1975, after the relevant previous year ended on September 30, 1975. The court noted that for the assessment year 1976-77, section 40A(7)(b)(i) alone is applicable, which requires the gratuity trust to be in existence during the relevant previous year. Since this was not the case, the assessee was not entitled to the deduction. The Tribunal's decision was upheld, and the court answered question No. 5 in Income-tax Reference No. 417 of 1982 in the affirmative, against the assessee and in favor of the Revenue. Similarly, question No. 4 in Income-tax Reference No. 375 of 1985 was answered against the assessee and in favor of the Revenue. Conclusion: All the questions referred to the court in Income-tax Reference No. 417 of 1982 and Income-tax Reference No. 375 of 1985 were answered against the assessee and in favor of the Revenue. A copy of the judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.
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