Law:

Section:

Section 34(3)(a) of the income-tax act, 1961-Development rebate-Conditions for allowance of-Whether development rebate is allowable even if separate reserve account was not created for relevant previous year by assessee as required under section 34(3)(a) on the ground that reserve created in earlier years were excessive and that sufficient funds were available in other accounts, which could be earmarked for development rebate reserve-Held, no Facts During the accounting year ended 31-12-1974, the assessee-company had installed certain machinery and, without creating a reserve as contemplated under section 34(3)(a), claimed deduction of certain amount by way of development rebate in the assessment year 1975-76. The ITO disallowed the claim. On appeal, the AAC, having found that in the earlier accounting years 1965 to 1973, the assessee had created reserves which were more than required in respect of the development rebate for those years, took the view that the assessee was having a development reserve which was sufficient to cover all the investments made in respect of the machinery in the previous year under consideration. He further held that as there was nothing in the Income-tax Act which required that the equivalent to the development rebate claimed should be debited in the profits and loss account of the relevant year for entitlement to the claim for deduction, the assessee was entitled to the impugned deduction. On further appeal, the Tribunal held that section 34(3) could not be construed as a statutory obligation to maintain a separate fund known as development rebate reserve and that there was no legal bar against the inclusion of such amount in the balance sheet under a separate account such as shareholder's account. If there were funds available in that account, the assessee should be construed to have complied with the statutory requirements, or if there were sufficient funds available in another account which could be earmarked for development rebate reserve that would be sufficient for the purpose of compliance with the statutory provisions. Consequently, it upheld the AAC's order. Ota reference: Held It is well settled that while interpreting a…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492