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TMI Blog1972 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ed March 31, 1958, it had purchased seven new buses, of which four were put on the road after December 31, 1957. In respect of the bus service business it filed a return on February 26, 1959, in which depreciation totalling Rs. 2,00,252 was claimed by the assessee. This included development rebate on seven new buses. The total development rebate in respect of the seven new buses claimed was Rs. 62,216, out of which a sum of Rs. 35,727 related to the development rebate on the four new buses put on the road after December 31, 1957. The Income-tax Officer rejected the claim of the assessee for development rebate in respect of the seven buses purchased during the year of account on the ground that buses cannot be " installed " within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserve at least before the completion of the assessment and that therefore it is the state of affairs existing at the time of assessment that one has to look into to determine whether the assessment has been made in accordance with law. Hence, the Tribunal was of the view that unless the assessee had created the reserve before the assessment was completed he could not be said to have complied with the requirements of the proviso enabling the Income-tax Officer to allow the development rebate. In support of its decision the Tribunal also relied on the decision of this court in Commissioner of Income-tax v. Veeraswami Nainar. It is relevant to mention that though the orders dealt with the development rebate amounting to Rs. 62,216 in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires two conditions to be complied with before a development rebate could be allowed. They are: (1) in the case of machinery or plant installed after December 31, 1957, 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 a reserve account; and (2) this reserve has to be utilised by the assessee during a period of ten years next following for the purposes of the business of the undertaking but shall not be used for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. A reading of this provision makes it clear that the debiting of the profit and loss acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner on appeal by the assessee accepted the contention that even in respect of buses and lorries development rebate is allowable but on the ground that the proviso to section 10(2)(vib) had not been complied with inasmuch as the assessee had not set apart 75% of the development rebate to the reserve account, he sustained the order rejecting the allowance towards development rebate reserve. On appeal, the Tribunal held that, in their opinion, it will be enough if the assessee carries out the condition even at a later stage. In their view, what all that was required by the statute was that there must be book entries in support as a kind of only a follow up of the assessee's claim and in that view directed the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to that section states that no allowance under that clause shall be made unless the conditions contained in sub-clauses (a) and (b) thereto have been complied with. That means that the assessee will not be entitled to allowance unless he had complied with the conditions referred to therein." This decision really concludes the point now in issue. We may also mention that this decision was followed in another decision of this court in Indian Overseas Bank Ltd. v. Commissioner of Income-tax and later approved by the Supreme Court in Indian Overseas Bank Ltd. v. Commissioner of Income-tax. In the latter case the Supreme Court held that the creation of the reserve contemplated by the proviso to section 10(2)(vib) is a condition precedent for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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