833/CBDT. - Income Tax - 833/CBDT

INSTRUCTION NO. 833/CBDT Dated : May 12, 1975 Section(s) Referred: 34(3)(a) Statute: Income - Tax Act, 1961 Section 34(3)(a) of the Income-tax Act, 1961 inter alia provides that development rebate shall not be allowed unless an amount equal to 75% of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to the reserve account to be utilised by the assessee during a period of eight years next following for the purpose of the business of the undertaking. However, the first proviso to the above section provides that the above condition shall not apply where the assessee is a company being a licensee within the meaning of the Electricity (Supply) Act, 1948. 2. A question has come up for consideration of the Board whether the State Electricity Boards are entitled to the benefit of the first proviso to section 34(3)(a) of the Income-tax Act, 1961. The Board has considered the question in consultation with the Comptroller and Auditor General of India and the Ministry of Law and have been advised that the definition of licensee occurring in section (6) of the Electricity Board. This is so not withstanding the provisions of section 26 of that Act which state that an Electricity Board shall have the power and obligation of a license under the India Electricity Act and an Electricity Board is deemed to be a license for the purposes of the India Electricity Act. 3. Section 26 of the Electricity (Supply) Act, 1948 is subject to the provisions of section 2(6) of the Act. In view of the definition of licensee given in section 2(6) which specifically excludes the Board the State Electricity Boards will not be regarded as licensee and consequently not entitled to the benefit of the first proviso to section n4(3)(a) of the Income-tax Act, 1961. 4. In view of the opinion of the Ministry of Law, the Board have decided that the following course of action may be adopted:- (a) Pending assessments, if any, may be completed on the basis of the advice of the Ministry of Law; (b) Remedial action may be taken to the extent possible in respect of completed assessments; (c) Assessments disputed in appeal before appellate authorities may be defended on the basis of the said advice. Necessary instructions may kindly be issued to the officers working in your charge on the above lines.