The assessee's claim for development rebate on certain assets. - Income Tax - 225/CBDT

INSTRUCTION NO. 225/CBDT Dated: September 30, 1970 Section(s) Referred: 155(5) , 35(11) of 1922 Act Statute: Income - Tax Act, 1961 Recently a case came to the notice of the board wherein an original assessment order dated 15-2-58 for the assessment year 1957-58 the ITO rejected assessee's claim for development rebate on certain assets. The disallowance was upheld by the AAC as well as the Tribunal. The assessee filed a reference application u/s.66(1) of the I.T.Act,1922. The High Court decided the reference in assessee's favour in July, 1965. As per the directions of the High court the development rebate was thus granted by the ITO only in May 1966 in respect of assessment year 1957-58. 2. The assessee had, in the meanwhile already transferred the assets in question in May 1960 and thus action to withdraw the development rebate u/s.35(11) of the I.T.Act,1922 was called for but the time limit for taking such action expired in September 1964 i.e., 4 years from the end of the accounting year in which transfer took place. This gave rise to a peculiar situation where relief by way of development rebate had to be given under the High Courts order but the development rebate could not be withdrawn as it should have been done u/s.35(11). Thus the assize got an unintended relief. 3. The Board desire that in dealing with such cases the ITOs should be more vigilant. They would take steps to bring to the notice of the High court the fact that the assets had been already transferred and should ask for proper directions for withdrawal of the rebate. 4. These instructions may please be brought to the notice of the ITOs working in your charge.