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TMI Blog1983 (11) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment rebate has attained finality as the Tribunal has upheld the rejection of the claim. For the assessment year 1971-72, the assessee, while furnishing the return, did not claim development rebate as in its view it was allowable only in the previous year 1970-71. However, when the assessment for 1970-71 was completed, disallowing the claim of the assessee, the assessee by a letter dated December 6, 1972, requested the ITO to allow the claim for development rebate at least in the assessment year 1971-72. The ITO rejected the Said claim on the ground that the firm had not created the necessary reserve during the previous year relevant to the assessment year as required under s. 34(3)(a) of the I.T. Act, 1961. According to the ITO, the creation of a reserve in an earlier previous year is not sufficient to obtain development rebate for the subsequent year, since the creation of a development rebate in the previous year is a condition precedent for claiming the relief by Way of development rebate under s. 34(3)(a). In that view, the ITO rejected the assessee's claim for development rebate for the year 1971-72. The assessee took the matter in appeal to the AAC. The AAC found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than (i) for distribution by way of dividends or profits; or (ii) for remittance outside India as profits or for the creation of any asset outside India. " (Provisos omitted). This provision contemplates the grant of development rebate only in cases where the assessee debits an amount equal to 75% of the development rebate to the profit and loss account of the relevant previous year and credits it to a reserve account to be utilised by the assessee during the period of eight years next following for the purpose of business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for creation of assets outside India. It must be noted that the provision is in a negative form and it says " no deduction under section 33 towards development rebate shall be allowed " unless the conditions set out therein are satisfied. Therefore, the condition of debiting an amount equal to 75% of the development rebate to the profit and loss account of the relevant previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that fund so set apart not only satisfied the requirements of s. 17 of the Banking Companies Act, but also the requisites of the said Explanation to s. 10(2)(vib). This court held that such a creation of a general reserve may not be sufficient compliance with the statutory provision and the claimant for development rebate should satisfy two conditions that 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 to be utilised by the assessee during a period of ten years next following for the purpose of the business of the assessee and in that case those two conditions have not been satisfied for the assessee has created a general reserve and not the specific reserve for development rebate. In that case, the court has specifically pointed out that the requirement of clause (b) to proviso to the Explanation to s. 10(2)(vib) is not an idle formality but is intended to enable the Revenue to trace the movement of the fund debited as part of the development rebate in the profit and loss account and credited to reserve account and unless this is done and if the fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year. After construing the provision in s. 34(3)(a), this court categorically held that the assessee is not entitled to claim development rebate in the subsequent year based on the creation of such a reserve in the earlier previous year. The court has pointed out (p. 625) : " Section 34 prescribes conditions for depreciation allowance and development rebate allowable under s. 33. Section 34(3) provides that the deduction referred to in s. 33 shall not be allowed unless 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 the assessee during a period of 8 years next following for the purpose of the business of the undertaking. The business purpose would not include, (a) distribution by way of dividends, or (b) remittances outside India of profits, or (c) for the creation of any asset outside India. There is an Explanation which provides that the deduction referred to in s. 33 should not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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