9911796707
TMI Blog1997 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned in the present tax case reference. In the assessment year 1972-73, the assessee claimed the development rebate of a sum of Rs. 9,62,422 and created a reserve for a sum of Rs. 7,22,000. The Income-tax Officer allowed the claim of the assessee. It is significant to notice that the Income-tax Officer in the process allowed the development rebate claimed for and carried forward from the assessment year 1971-72. The Income-tax Officer, subsequently, realised that the allowance of the development rebate of Rs. 1,14,114 relating to the assessment year 1971-72 in the assessment made for the assessment year 1972-73 was a mistake since no reserve was created and the reserve created by the assessee of a sum of Rs. 7,22,000 was just adequate to allow the deduction for the development rebate claimed for the assessment year 1972-73, viz., Rs. 9,62,422. The Income-tax Officer, therefore, proposed to revise the assessment under section 154 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), to withdraw the excess development rebate allowed amounting to Rs. 1,14,114. After hearing the objections raised by the assessee, the Income-tax Officer found that the profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt required to be created. The Appellate Tribunal placing reliance on circular of the Board in No. 259, dated July 11, 1979, held that on the basis of the Board's circular, the shortfall could be made up by the assessee in the subsequent assessment year. The Tribunal found that the assessee created an excess reserve of Rs. 3,97,068 during the subsequent assessment year which was more than adequate to cover the shortfall in respect of the assessee's claim of Rs. 1,14,114. The Tribunal, therefore, held that there was no allowance of excessive rebate by mistake which was required to be rectified. In this view of the matter, the Appellate Tribunal accepted the claim of the assessee and allowed the appeal preferred by the assessee. Aggrieved by the decision of the Tribunal, the Revenue has sought for and obtained a reference to this court and on the basis of the direction of this court under section 256(2) of the Act, the Tribunal has stated a case and referred the following question of law : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in rectifying the assessee's assessment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same and the view of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner. The Tribunal, however, has taken a view that it is a case of only a shortfall and in the subsequent assessment year 1973-74, there was an excess reserve of Rs. 3,97,068 which would be more than adequate to cover the shortfall in respect of the claim of the assessee of Rs. 1,14,114. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that unless an amount equal to 75 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 the assessee during the period of eight years next following for the purposes of the business of the undertaking, the assessee is not eligible to claim the development rebate. He, therefore, submitted that in the absence of the reserve, the Tribunal was in error in directing the Income-tax Officer to grant the allowance. He submitted that the presence of a larger amount in the development rebate reserve in the subsequent year cannot be taken as satisfying the specific requirements of section 34(3)(a) of the Act, viz., of a debit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512, and the decisions of this court in the cases of (i) CIT v. Aruna Sugars Ltd. [1980] 123 ITR 619 and (ii) CIT v. Arasan and Co. [1985] 152 ITR 206, in support of his plea that the reserve must be created in the relevant previous year. We have carefully considered the submissions made by learned counsel for the parties. As already seen, we are not only concerned with the provisions of section 34(3)(a) of the Act, but also the action of the Income-tax Officer in passing the order of rectification under section 154 of the Act. No doubt, there is force in the contention of learned counsel for the Revenue that the condition of debiting an amount equal to 75 per cent. of the development rebate to be claimed in the profit and loss account relating to the previous year and crediting the same to the reserve account for utilisation during the period of eight years next following for the purpose of business undertaking is a condition precedent for claiming the grant of relief by way of development rebate. When the assessee has not debited admittedly any amount to the profit and loss account of the relevant previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one view and this court in the two decisions referred to above took a diametrically opposite view. The view of the Central Board of Direct Taxes is no better. In Circular No. 259, dated July 11, l979, the Board has taken a view that the condition for creation of the reserve would be satisfied if the sum total of the reserve credited either in the year of creation or in the subsequent year or years is equal to 75 per cent. of the actual allowance of the development rebate in any year or years. (emphasis supplied by underlining the relevant portion) but, in the earlier circular dated October 14, 1965, the Board has taken a view that if the provision for development rebate reserve in the earlier year is in excess of the required amount, such excess will not be taken into account in determining the quantum of statutory deduction required to be made in the subsequent year, but, however, it will be open to the assessee to transfer the earlier excess of the development rebate for the purpose of making use of the same in the later year. A reading of the Board's circular dated October 14, 1965, and July 11, 1979, shows that the stand taken by the Board, is also not consistent. That apart, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
