1972 (2) TMI 2 - HC - Income Tax

Assessee s account books relating to his transport business were burnt in a fire accident allowability of claim for development rebate - mere loss of books of account cannot make the profit and loss account filed by the assessee unreliable for the purpose of s. 10(2)(vib), therefore claim for rebate is admissible

Summary

Issues: Assessment of development rebate for the assessment years 1958-59 and 1959-60 based on the loss of account books in a fire accident, compliance with Explanation 2 to section 10(2)(vib) of the Indian Income-tax Act, 1922, entitlement to development rebate for buses and new diesel engines, correctness of granting development rebate for the assessment year 1959-60.

Analysis:

The judgment pertains to two connected cases involving the assessment years 1958-59 and 1959-60, concerning a common assessee engaged in transport business. The assessee's account books related to the transport business were destroyed in a fire accident, leading to the preparation of ledgers without day books to determine profit and loss for the respective years. The assessee had provisioned for a development rebate reserve in the ledgers. The Income-tax Officer initially denied the development rebate claim, citing non-compliance with Explanation 2 to section 10(2)(vib) of the Act, as the development rebate reserve was not shown in the account books. The Appellate Assistant Commissioner upheld this decision, but the Tribunal disagreed, relying on a previous court decision and allowed the development rebate claim.

Upon consideration of Explanation 2 to section 10(2)(vib), the Court found that the Tribunal's decision was correct. The Explanation does not mandate the presence of account books but requires the debiting of seventy-five percent of the development rebate to the profit and loss account and crediting it to a reserve account for future business purposes. As the assessee submitted a reliable profit and loss account, despite the loss of account books, the absence of day books was deemed insufficient to question the accuracy of the filed account. Referring to a prior court ruling, the Court emphasized that statutory bookkeeping is not mandatory, and maintaining accounts sufficient to determine the value written off is acceptable.

The Court highlighted that Explanation 2 does not necessitate regular account books' existence, focusing solely on the provision of a development rebate reserve by the assessee. As the genuineness of the profit and loss account was unchallenged by the department, the Court ruled in favor of the assessee, granting entitlement to the development rebate for both assessment years. Consequently, the questions posed were resolved in favor of the assessee, with costs awarded in one of the tax cases.