Law:

Section:

Section 33, read with section 34 of the Income-tax Act, 1961 - Development rebate - Assessment year 1967-68 - Income-tax Officer allowed to assessee development rebate at enhanced percentage on machinery installed during financial year relevant to assessment year in question - Subsequently, he, acting under section 154, withdrew excess development rebate after having discovered that reserve created during such financial year was less than 75 per cent of development rebate as required under section 34(3)(a) - Assessee's plea that shortfall in reserve for relevant assessment year was made good in books of account by reserve made for subsequent assessment year, was rejected on ground that company should have made sufficient reserve during relevant assessment year itself - Whether on facts, ITO was justified in withdrawing excess development rebate - Held, yes FACTS The assessee had installed a machinery in the financial year relevant to the assessment the assessment year in question. The ITO had allowed the enhanced development rebate at 35 per cent for such machinery. Subsequently, he discovered that the assessee had not created adequate reserve of 75 per cent of the development rebate claimed. He, therefore, rectified the assessment order under section 154 and withdrew the excess rebate allowed. The AAC did not accept the assessee's contention that the deficiency was made good in the subsequent year and held that the provision for development rebate at 35 per cent was in the statute book from 1-4-1964, and the company should have made sufficient reserve during that year itself. He also rejected the contention of the company that section 154 was not applicable. The Tribunal dismissed the assessee's appeal. On reference: HELD Clause (iii) to section 33 as amended by Act No. 15 of 1965, provides for the allowance of development rebate at 35 per cent of the actual cost of machinery or plant to the assessee engaged in priority industry. This amendment came into force with effect from 1-4-1965. So, in the relevant assessment year, the development rebate was allowable at 35 per cent of the actual cost. But the development rebate under section 33 is subject to section…

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