Law:

Section:

Section 33 read with section 34 of the Income-tax Act, 1961 - Development rebate - Assessment year 1968-69 - Whether even if reserve was not created in year machineries were first put to use, development rebate has to be computed and has to be carried forward to be allowed in such year when reserve is created to satisfy condition imposed in section 34(3) - Held, yes FACTS Assessee put up its plant and machinery for the first time during the relevant assessment year. The ITO computed the assessee's loss for the year but did not allow any development rebate to be carried forward as provided in section 33(2) on the ground that the condition imposed under section 34(3) had not been satisfied. On appeal, the assessee contended that even though the development rebate could not be allowed because the reserve had not been created, it was incumbent on the ITO to determine the development rebate allowable so that it could be carried forward to subsequent assessment years for adjustment as and when there was assessable profit and a reserve to satisfy the condition imposed in section 34(3). The AAC dismissed the assessee's appeal but the Tribunal accepted the assessee's contention and required the ITO to compute the development rebate for the purpose of being carried forward. On reference : HELD The three qualifications for being entitled to development rebate are : (i)the asset should have been owned by the assessee during the relevant accounting year; (ii)it must be wholly used for the purpose of the business; and (iii)the business should have been carried on by the owner during the entire accounting period. Under section 33, the quantum of allowance is fixed by a percentage of the actual cost. The year for which development rebate is claimable is, in the case of machinery or plant, the year during which the same is put to use; sums equivalent to the percentage indicated in section 33 are to be deducted in the relevant accounting year in computing profit or loss of the assessee. Section 33 requires that unabsorbed development rebate will have to be carried forward to subsequent years to the limit of eight years. Thus, while section 33 lays down that development rebate is…

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