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TMI Blog2013 (9) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee is running sugar factory and fully owned by the State of U.P. For the assessment year under consideration, the loss return was filed before passing of the assessment order under Section 143(3) of the Act. The AO observed that the assessee had claimed the investment allowance deduction for Rs.1,40,35,103/- under Section 32A(1) of the Act. The AO has opined that the assessee did not comply with the statutory requirement of Section 32A(4)(ii) of the Act, as the assessee has not created the 75% reserve amounts to Rs.1,05,26,327/-, but created a reserve only for Rs.93,26,754/-. The same is less than 75% of the claim for the investment allowance. Finally, the AO has rejected the claim of the assessee and made the addition, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : [Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words "twenty-five per cent", the words "twenty per cent" had been substituted :] Provided [further] that no deduction shall be allowed under this section in respect of-- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house; (b) any office appliances or road transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt") to be utilised-- (a) for the purposes of acquiring, before the expiry of a period of ten years next following the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the [second] proviso to sub-section (1)] for the purposes of the business of the undertaking; and (b) until the acquisition of a new ship or a new aircraft or new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be created by the assessee in respect of the previous year in which such further credit is made: Provided that such opportunity shall not be allowed by the [Assessing] Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to sub-section (1) of section 145 or sub-section (2) of that section or the omission by the assessee to disclose his income fully and truly. It may be mentioned that Hon'ble Bombay High Court in the case of Indian Oil Corporation Ltd. vs. S.Rajagopalan, Income-Tax Officer, Companies Circle II(1), Bombay & Ors., [1973] 92 ITR 241, observed that - "... if in the assessment year rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy of profits and the reserve was created in subsequent years, the assessee would be entitled to development rebate." In view of above, we are of the view that if during the assessment year relevant to the year of installation or use the total assessed income of the assessee is nil or negative, then the assessee cannot be expected to create an actual and non-illusory reserve equivalent to 75% of the claim and as such reserve can only be created out of assessed profits. There can be no obligation on the part of the assessee to create a reserve as a condition merely for carrying over the development rebate without it being actually allowed to the assessee by setting off the rebate against the assessed profit. So, we are unable to accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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