Law:

Section:

I. Section 33 of Income-tax Act, 1961 (Corresponding to section 10(2)(vii) read with section 35(11) of Indian Income-tax Act, 1922) – Development rebate – Assessment year 1959-60 – Assessee-family carrying on business of playing motor buses transferred its buses to a limited company for a consideration higher than their written done value in assessee's books of accounts – ITO rectified assessment by mentioning both section 35(11) of 1922 Act and also section 154 of 1961 Act, stating that as buses had been sold, there was no question of allowing deduction of development rebate – Tribunal confirmed rectification order – Whether since there was sale of buses by assessee to limited company within statutory period, Tribunal was right in holding that development rebate granted originally could be withdrawn – Held, yes FACTS-I During the relevant assessment year, the assessee-family deriving income by plying motor buses, transferred its buses to a limited company for a consideration higher than their written done value in the assessee's books. The assessee did not include in its assets those buses from the stage they were transferred to the limited company, and correspondingly the company showed these buses as its asset. The assessee had been allowed deduction on account of development rebate for the assessment year 1959-60. Subsequently, on receipt of audit note raising a point that with the sale of the relevant assets depreciation was not admissible, the ITO reopened the assessment and made assessment under section 147(b). The ITO by invoking the provisions of section 35(11) of the 1922 Act as also section 154 of the 1961 Act, rectified the mistake in the assessment and withdrew the development rebate. The Tribunal confirmed the withdrawl, by upholding the rectification order. On reference: HELD-I In the instant case, even at the time when the assessment came to be made, the transfer of the nine buses had already been effected. Therefore, the ITO could not have granted development rebate under the provisions of section 10(2)(vib) of the 1922 Act or section 33 of the 1961 Act. As the assets had been sold within the period of eight years specified in section 155(5) or…

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