9911796707
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Issues:
1. Petition under article 226 to quash assessment order. 2. Disallowance of carried forward loss by Income Tax Officer. 3. Interpretation of proviso in Taxation Laws (Amendment) Act, 1960. 4. Contention on adjustment of unabsorbed development rebate. 5. Applicability of Explanations to development rebate. 6. Impact of proviso on development rebate for road transport vehicles. 7. Legal principles governing adjustment of development rebate. 8. Interpretation of section 24 in relation to business losses. Detailed Analysis: 1. The petitioner filed a petition under article 226 seeking to quash the assessment order by the Second Income Tax Officer, Tirunelveli. The petitioner, a private limited company in the transport business, claimed a carried forward loss for the assessment year 1960-61, which included unabsorbed development rebate directed to be allowed by the Appellate Assistant Commissioner. The Income Tax Officer refused to allow the set-off of this loss, leading to a tax demand, causing financial hardship to the petitioner. 2. The department contended that the Income Tax Officer was justified in disallowing the unabsorbed development rebate from being carried forward based on a newly inserted proviso in the Taxation Laws (Amendment) Act, 1960. The department argued that the development rebate should retain a distinct character for future adjustments, raising the principal issue for determination. 3. The court rejected the department's argument that the petition under article 226 was an improper remedy, acknowledging the financial burden imposed on the petitioner due to the incorrect application of the law. The court admitted the petition, emphasizing the need for relief in such circumstances despite other appeal remedies being available. 4. The main contention revolved around whether the unabsorbed development rebate could be split from the carried forward loss and remain unadjusted in subsequent years. The department initially relied on an explanation to section 10(2)(vi) but later conceded its inapplicability. The court examined the distinct character of development rebate and its adjustment against profits in succeeding years. 5. Section 10(2)(vi), (via), and (vib) of the Income Tax Act dealt with depreciation and development rebate allowances for machinery and plant. The court clarified the application of Explanations 1 and 2, highlighting their relevance to machinery installed after specific dates and their inapplicability to machinery installed before December 31, 1957. 6. The Taxation Laws (Amendment) Act, 1960, inserted a proviso denying development rebate for road transport vehicles. The court noted the prospective nature of the proviso and emphasized that it could not withdraw previously granted development rebates or extinguish unabsorbed development rebates. 7. The court rejected the department's argument that development rebate should be maintained as a distinct entity in succeeding years to prevent converting business profits into losses. The court emphasized that development rebate, once granted, constituted an allowance to be deducted from gross profits, and any resulting net loss was part of income computation without retaining the character of unabsorbed development rebate. 8. The court analyzed the interpretation of section 24 in relation to business losses, rejecting the department's contention that development rebate should be treated separately based on the principle of carrying forward unabsorbed amounts. The court ruled in favor of the petitioner, finding the assessment in violation of relevant provisions and allowing the petition while awarding costs to the petitioner.
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