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TMI Blog1988 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... -75, such development rebate should be redetermined according to the appropriate rates applicable to a priority industry ? (2) Whether the Tribunal was right in law in holding that even though such development rebate had been determined at lower rates in the earlier years, it should be redetermined at the higher rate applicable to a priority industry, though the time for rectification of the mistake under section 154 has expired ? " Brief facts of the case, as are available in the records, are as follows : For the assessment year 1974-75, the Income-tax Officer accepted the claim of the assessee that it was a priority industry which was entitled to development rebate at the higher rate of 35% as the industry was included at item 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligatory on his part to compute the development rebate at the rates applicable to a priority industry. Thus, the Tribunal confirmed the order of the Appellate Assistant Commissioner on this point. Aggrieved by this, the Revenue sought a reference under section 256 of the Act and the Tribunal has referred the questions referred to above to this court for its opinion. Sri K. Srinivasan, learned counsel for the Revenue, does not dispute that the development rebate to which the assessee was entitled during the assessment years 1970-71 and 1971-72 was at the rate of 35% of the value of the new plant and machinery purchased by the assessee. He also does not dispute that there has been a wrong computation at the rate of 25% and also that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied forward to the subsequent years, but not for more than eight years. Thus, over a period of eight years, development rebate will be allowed depending upon the total income of the assessee, not necessarily in one single year. The same can be distributed over a period of eight years or less depending upon the amount of development rebate and the figures of total income of the assessee in several assessment years. Section 34(3), however, imposes another condition for entitlement of development rebate, that is, the assessee has to create a reserve to cover 3/4ths of the development rebate to be allowed in a given year. In view of section 34(3)(a), it is quite sufficient if the assessee creates reserve in respect of each of the years to cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 34 of the Act appears to us to be correct. However, Sri K. Srinivasan, learned counsel for the Department, placed strong reliance on the decision of this court in CIT v. Sree Valliappa Textiles Limited [1987] 166 ITR 548, and contended that the claim of development rebate should be made in the year of installation of machinery or plant and the computation made thereon cannot be meddled with, except as provided in section 154 of the Act. The said decision explains the scheme of section 80J and states that the said section does not require that in order to claim the benefit under it, a computation should be made only when there is profit or gain. But as far as development rebate is concerned, it could be set off only against the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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