1970 (4) TMI 12

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..... ras Bench), referred to the High Court of Madras, a statement of case under section 66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as " the Act "). The High Court answered one of the questions submitted along with the statement of case in favour of the assessee and the other in favour of the revenue. The revenue has not appealed against the decision of the High Court to the extent it went against it, but the assessee has brought this appeal by certificate challenging the correctness of the view of the law taken by the High Court on question No. 1 submitted for its opinion. The question of law that we have to consider in this appeal is : " Whether, the creation of a reserve in compliance with section 17 of the .....

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..... wance by way of development rebate claimed. The rebate under proviso (b) of section 10(2)(vib) is a concession granted but that concession is made subject to fulfilment of certain requirements. The grant of this allowance is made subject to the conditions prescribed in proviso (b) to Explanation (2) to section 10(2)(vib). The relevant portion of that proviso reads : " ...an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by him during a period of ten years next following for the purposes of the business of the undertaking, except... " The creation of the reserve contemplated b .....

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..... in allowing a development of the assessee's business from out of the reserve fund is apparent from the terms of the proviso. The entries in the account books required by the proviso are not an idle formality. The assessee being obliged to credit the reserve fund for a specific purpose, he cannot draw upon the same for purposes other than those of the business and that amount cannot be distributed by way of dividend. It is also clear from the terms of the proviso that the transfer to the reserve fund should be made at the time of making up the profit and loss account. The assessee not having complied with the requirements of section 10(2)(vib) read with Explanation thereto, it is not entitled to claim the allowance in question. In the .....

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