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Issues Involved:
1. Withdrawal of the claim of extra shift allowance. 2. Quantification and carrying forward of the development rebate without creating a statutory reserve. Detailed Analysis: 1. Withdrawal of the Claim of Extra Shift Allowance: The first issue pertains to whether the Tribunal was justified in holding that the assessee should withdraw the claim of extra shift allowance before the Income-tax Officer and that he could not allow the claim after such withdrawal. The assessee had initially claimed depreciation including an extra shift allowance of Rs. 1,31,230 but later withdrew this claim. The Income-tax Officer allowed the claim of depreciation as originally claimed, resulting in the income for the year being returned at Rs. 7,19,590. However, after setting off past losses and unabsorbed depreciation, the income was determined at nil. The Appellate Assistant Commissioner and the Appellate Tribunal upheld the view that the Department could not compel the assessee to claim the extra shift allowance once it had been withdrawn. The court, upon the concession of the assessee's counsel that the order of the Income-tax Officer did not harm the assessee, upheld the order and did not find it necessary to answer this question. 2. Quantification and Carrying Forward of Development Rebate Without Creating a Statutory Reserve: The second issue concerns whether the claim for development rebate should be quantified in the year under consideration and carried forward to the succeeding years, even if no reserve had been created as contemplated under section 34 of the Income-tax Act. The assessee had installed plants and machinery worth Rs. 4,31,924 and claimed a development rebate of Rs. 1,51,171. The Income-tax Officer rejected this claim because no reserve had been created. The Appellate Assistant Commissioner directed that the development rebate should be quantified and carried forward. The Tribunal upheld this view. The court analyzed sections 33 and 34 of the Income-tax Act, which deal with the allowance of development rebate and the conditions for its allowance, respectively. Section 34(3)(a) stipulates that the development rebate shall not be allowed unless an amount equal to seventy-five percent of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account. The court held that mere quantification is not the same as allowance and that development rebate should be quantified and carried forward even if no reserve had been created. The rebate will be allowed in the year the statutory reserve is created, within an outer limit of eight years from the year of installation. The court referenced several precedents, including Radhika Mills Ltd. v. CIT and CIT v. Orissa Flour Mills (P.) Ltd., which supported the view that development rebate should be quantified and carried forward even if no reserve was created. The court also discussed various circulars issued by the Central Board of Direct Taxes, which clarified that the requirement of creating a reserve could be fulfilled in subsequent years if the total income in the year of installation was a loss. The court concluded that the Tribunal was correct in holding that the claim for development rebate should be quantified in the year under consideration and carried forward to the succeeding years, even if no reserve had been created. The reference was answered in favor of the assessee, with costs payable by the Commissioner of Income-tax, Patna, to the assessee. Conclusion: The court upheld the order of the Income-tax Officer regarding the withdrawal of the extra shift allowance and agreed with the Tribunal's decision that the development rebate should be quantified and carried forward, even if no reserve had been created. The reference was answered in favor of the assessee.
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