1990 (10) TMI 3 - SC - Income Tax

Circular No. 189 dated January 30, 1976 - Reserve for purposes of development rebate - Whether, the assessee can be said to have complied with the provisions of proviso (b) to section 10(2)(vib) of the Indian Income-tax Act, 1922, and was, therefore, entitled to allowance of development rebate on the plant and machinery installed after January 1, 1958

Summary

Issues:
Interpretation of proviso (b) to section 10(2)(vib) of the Indian Income-tax Act, 1922 regarding entitlement to allowance of development rebate on plant and machinery installed after January 1, 1958.

Analysis:
The appeal was against a judgment by the Allahabad High Court concerning the interpretation of proviso (b) to section 10(2)(vib) of the Indian Income-tax Act, 1922. The dispute revolved around the timing of creating the development rebate reserve. Previous cases like CIT v. Veeraswami Nainar and Indian Overseas Bank Ltd. v. CIT established the requirement to separately create the development rebate reserve. A circular by the Central Board of Direct Taxes clarified that in certain cases, the development rebate reserve may be included in another reserve without specific creation. Litigation arose due to differing interpretations by taxing authorities and High Courts. The Gujarat High Court took a narrow view, while other High Courts took a broader view, considering different explanations. The Board withdrew a circular to align with the broader view, which was followed by income-tax authorities. The Supreme Court upheld the High Court's judgment based on the Board's clarification, stating that the broader view was valid under both the old and new Income-tax Acts.

In conclusion, the Supreme Court dismissed the appeal, leaving the High Court's judgment unchanged. The Court noted the Board's clarification aligning with the broader view taken by various High Courts and income-tax authorities. As the Board's view was deemed valid under both old and new Income-tax Acts, the Court saw no need to intervene in the conflicting interpretations. Therefore, no costs were awarded in this case.