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TMI Blog1975 (12) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee filed its return for the year on February 12, 1968, showing a loss of Rs. 40,067. On 6th of March, 1969, a revised return was filed disclosing loss of Rs. 67,000 and the assessee claimed development rebate allowance of Rs. 20,402 in the revised return. The original return was not accompanied by the profit and loss statement. The Income-tax Officer did not accept the claim for development rebate on the ground : " ...... The assessee has claimed development rebate allowance at Rs. 20,402 in the revised return. The assessee has debited Rs. 20,402 in the profit and loss account. It will be seen that the assessee has filed return for the first time on February 12, 1968. The return was not accompanied by profit and loss account. In the duplicate profit and loss account there was no debit for development rebate and in the balance-sheet also there was no provision for development rebate. When the assessee filed its revised return on March 6, 1969, then only in the profit and loss account and in the balance-sheet provision was made for this development rebate. As such the advantages given to the assessee under the statute were not fully availed of and all the conditions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are that during the accounting year relating to the assessment year, the appellant-company had transferred a sum of Rs. 6 lakhs from the profit and loss account to the reserve fund. This sum is sufficient to meet the requirements of section 17 of the Banking Companies Act, 1949, as well as of proviso (b) to section 10(2)(vib) of the Act (Indian Income-tax Act of 1922, corresponding to section 34 of the 1961 Act), but no separate reserve fund as required by proviso (b) to section 10(2)(vib) had been created. The contention of the appellant is that as the transfer to the reserve is sufficient to meet the requirements of section 17 of the Banking Companies Act, 1949, as well as of proviso (b) to section 10(2)(vib) of the Act, in substance, if not in form, it has complied with the requirements of law and, therefore, it is entitled to the allowance of the rebate claimed ............." The court extracted the provisions contained in proviso (b) to Explanation 2 of section 10(2)(vib) of the Indian Income-tax Act of 1922 and observed : " The creation of the reserve contemplated by this provision is a condition precedent for obtaining the allowance of development rebate. Admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of the allowance were fulfilled. The assessee was also informed that the scheme of giving initial depreciation had been deleted as per the Income-tax Act and the company realised that the condition of creation of development reserve as, required by law had not been satisfied by it in so far as the profit and loss account of the year 1959 was concerned. Under these circumstances, by its letter, dated April 14, 1961, a representation was made by the assessee to the Central Board of Revenue, Ministry of Finance, Government of India, New Delhi, requesting the Board to direct the Income-tax Officer concerned to relax the condition for the purpose of assessment for the assessment year 1960-61 and to allow the assessee to create an additional reserve ' in the current year's account books ' and to allow rebate to them ........" The company's claim having not been allowed, the matter came before the Court at the instance of the assessee. In support of the assessee's claim, a decision of the Andhra Pradesh High Court in the case of Veerabadra Iron Foundry v. Commissioner of Income-tax and another decision of the Rajasthan High Court in the case of Commissioner of Income-tax v. Mazd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desh and the Rajasthan High Courts already referred to and three later decisions of the Allahabad, Bombay and Punjab and Haryana High Court. These are the cases of Commissioner of Income-tax v. Modi spinning and Weaving Mills Co. Ltd. ,Tata Iron and Steel co. Ltd. v. N.C.Upadhyaya and Commissioner of Income-tax v. Sardar Singh Sachdeva. It is unnecessary to refer to all these decisions at length because in our opinion a good review of the judicial opinion on the point is available from the decision of the Bombay High Court in Tata Iron and Steel Co, Ltd, v. N. C. Upadhyaya. Dealing with the Supreme Court decision, it has been stated at page 9 of the report : " The judgment of the Supreme Court in Indian Overseas Bank Ltd. v. Commissioner of Income-tax was rendered in an appeal against the judgment of a Division Bench of the Madras High Court consisting of Veeraswami J. (as he then was) and Natesan J. in the case of Indian Overseas Bank Ltd. v. Commissioner of Income-tax . In that case the assessee-company had claimed development rebate and contented that it had set apart a sum of Rs. 6,00,000 during, the assessment year out of its net profits which not only satisfied the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion of the matter and not dicta, whether obiter or otherwise." Having made the above observation regarding the Supreme Court decision, the Bombay High Court proceeded to deal with the Gujarat decision in Surat Textile Mills Ltd. v. Commissioner of Income-tax and observed : "...... We must point out that that was a case in which no development rebate was created during the year 1960-61, although there was a profit far exceeding the amount of the development rebate of Rs. 36,144. An entry allowed to been made after the end of the assessment year was held not to have complied with the condition of creation of a devlopment rebate reserve in the The learned judges of the Gujarat High Court took the view that in the case of Indian Overseas Bank Ltd., [1970] 77 ITR 512, the Supreme Court had decided that-- ' unless the reserve was created in the very same accounting year, development rebate should not be granted.' agreeing with the view of the Madras High Court and overruling the decision of the Andhra Pradesh and the Rajasthan High Courts. The Gujarat High Court held that in view of the aforesaid decision of the Supreme Court the benefit of the development rebate could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been done while closing the accounts and drawing up of the profit and loss statement. We agree with the view of the Bombay High Court that there is no upper limit of time fixed under the Act for claiming benefit of development rebate and by the time the revised return was filed due provision having been made, there was no defect which disentitled the assessee to claim and be granted the relief. As we find, the revised return has been accepted and dealt with. It was open to the Income-tax Officer to reject the revised return saying that it did not come within the purview of section 139(5) of the Act ;on the other hand he chose to act upon the revised return. Section 34(3)(a) of the Act provides : " The deduction referred to in section 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 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 remitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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