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TMI Blog1989 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... priate reserve in the accounts of the year in question ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee is entitled to the full amount of development rebate totalling to Rs. 8,29,641 ?" The facts shortly stated are that the assessee, who is engaged in the manufacture of textile goods, claimed before the Income-tax Officer development rebate of Rs. 8,29,641 but credited development rebate reserve of Rs. 4 lakhs only. This reserve credited fell short of the statutory requirement of 75% of the claim for development rebate. The Income-tax Officer, therefore, allowed development rebate to the extent of Rs. 5,33,333 corresponding to the reserve created of Rs. 4 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd held that the actual amount of development rebate allowed was Rs. 1,10,047 and, therefore, the assessee was obliged to create an appropriate reserve only with reference to this amount but, in fact, created a reserve to the extent of Rs. 4 lakhs. For this reason, it held that it was not necessary for the assessee to create an appropriate amount of reserve with reference to the claim of Rs. 8,29,641. The Tribunal, therefore, confirmed the decision of the Appellate Assistant Commissioner. On these facts, the questions set out above have been referred to this court. Our attention has been drawn to recent decision of the Supreme Court in Shri Shubhlaxmi Mills Ltd. v. Addl. CIT [1989] 177 ITR 193. There, the Supreme Court held as follows (pp. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally drawn up. That is a condition for securing the benefit of development rebate and if that condition is not satisfied, we fail to see how the deduction on account of development rebate can be claimed at all. Learned counsel for the assessee relies on West Laikdihi Coal Co. Ltd. v. CIT [1973] 87 ITR 501 (Cal) and CIT v. Modi Spinning and Weaving Mills Co. Ltd. [1973] 89 ITR 304 (All). Those were cases decided under the provisions of the Indian Income-tax Act, 1922, and there was no Explanation such as the one we have before us." "Having considered the matter at some length in the present case, it seems to us clear that in order to claim the deduction on account of development rebate under sub-section (1) of section 33, it is obligatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Shubhlaxmi Mills Ltd. v. Addl. CIT ), the Tribunal, however, approved the reasoning of the Appellate Assistant Commissioner. In our view, the controversy has been set at rest by the aforesaid decision of the Supreme Court in Shri Shubhlaxmi Mills Ltd. [1989] 177 ITR 193. In order to claim the deduction on account of development rebate under section 33(1) of the Act read with the Explanation to clause (a) of section 34(3), it is obligatory on the assessee to create reserve fund in the relevant previous year in which the machinery or plant is installed or first put to use irrespective of the result of the profit and loss account disclosed by the books of the assessee. Mere book entries will suffice for creating such a reserve fund. The deb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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