1985 (12) TMI 122 - AT - Income Tax

Summary

Issues:
1. Extension of previous year for assessment.
2. Allowance of development rebate on plant and machinery, furniture, and fittings.
3. Admissibility of additional claims for development rebate.
4. Consideration of entire claim for development rebate.
5. Restoration of appeal to CIT(A) for further consideration.

Extension of Previous Year for Assessment:
The appeal in question pertains to the assessment year 1975-76 and involves the extension of the previous year for the assessee, a Private Limited Company engaged in the business of exhibiting cinemagraph films. The issue arose as the assessee closed its accounts on 31st Dec., 1974, resulting in a previous year extending beyond 12 months, necessitating approval from the CBDT. However, as the approval was not obtained, the ITO considered the previous year to be 12 months ending on 27th Nov., 1974, for computing the total income for income-tax purposes.

Allowance of Development Rebate:
During the assessment, the assessee claimed development rebate on plant and machinery, furniture, fittings, and electric fans. The ITO disallowed the development rebate, citing the failure of the assessee to create the necessary reserve in that accounting year. The appeal before the CIT(A) primarily challenged the disallowance of the development rebate.

Admissibility of Additional Claims for Development Rebate:
There was a discrepancy in the claim made before the CIT(A) as the assessee inadvertently restricted the claim of development rebate to a specific amount related only to machinery. Subsequently, the assessee sought to include claims for furniture, fittings, and electric fans, which were initially omitted. The Revenue opposed these additional claims, arguing that the assessee had already restricted the claim before the CIT(A).

Consideration of Entire Claim for Development Rebate:
The Tribunal acknowledged that the restriction of the accounting period by the ITO led to a lack of proper consideration of the development rebate allowance. While the CIT(A) allowed the appeal for a limited amount, the Tribunal opined that the entire claim, including items like furniture and fittings, should be considered for development rebate. The matter was remanded to the CIT(A) for a comprehensive examination of the claim.

Restoration of Appeal to CIT(A) for Further Consideration:
In light of the above analysis, the Tribunal decided to restore the appeal to the file of the CIT(A) for proper disposal in accordance with the law. The Tribunal directed the CIT(A) to consider the observations made and allowed the appeal for statistical purposes. The judgment was influenced by several legal precedents cited by the assessee's counsel to support the admission of additional claims for development rebate.