Law:

Section:

Section 33 read with section 34 of the Income-tax Act, 1961 - Development Rebate - Assessment year 1970-71 - Assessee was State Electricity Board - Assessee's claim for development rebate was denied on ground that it had not created development rebate reserve - Whether State Electricity Board was a licensee within meaning of section 34(3)(a) and as such not required to create development reserve - Held, yes - Whether, therefore, assessee was entitled to development rebate - Held, yes FACTS The assessee was State Electricity Board. In computing the net loss of the assessee, the ITO disallowed the assessee's claim for deduction of development rebate on new machinery and plant. The ITO held that the assessee was not entitled to the deduction as it had not created a development rebate reserve as required by section 34(3)(a). It was contended by the assessee that it was a licensee within the meaning of the Electricity (Supply) Act, 1948 and, therefore, it was not required to create a development rebate reserve, but that contention was negatived. The same view was taken on appeal by the AAC. On further appeal, the Tribunal accepted the assessee's contention and allowed the deduction. On reference : HELD The Tribunal was right in holding that the Board was covered by the first proviso to section 34(3)(a) being a licensee within the meaning of the 1948 Act. The Board was thus not required to create a development rebate reserve for claiming development rebate under section 33. The Tribunal was right in allowing the claim of the assessee to the allowance of development rebate. Note: Decision was against Department. B.K. Rawat for the Applicant. B.L. Nema for the Respondent. JUDGMENT G.P. Singh, C.J.-The questions of law which we are required to answer in this reference under section 256(1) of the Income-tax Act, 1961, are as follows: "(1)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in their conclusion that the M.P. State Electricity Board, the assessee herein, is "a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948", specified in the proviso to section 34(3)(a) of the Income-tax Act,…

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