Law:

Section:

Section 154, read with section 33, of the Income-tax Act, 1961 - Rectification of mistakes - Apparent from record - Assessee-company claimed development rebate for assessment years 1970-71 and 1971-72 at rate of 25 per cent - Till assessment year 1974-75, development rebate could not be fully adjusted and was carried forward - For assessment year 1974-75 it was discovered that assessee being priority industry was entitled to development rebate at rate of 35 per cent - Accordingly, AAC allowed development rebate at rate of 35 per cent to assessee for assessment year 1974-75 and for earlier years also - Whether even though such development rebate had been determined at lower rates in earlier years, it should be redetermined at higher rate applicable to a priority industry, though time for rectification of mistake under section 154 had expired - Held, yes Facts The assessee-company claimed development rebate at the rate of 25 per cent for the assessment years 1970-71 and 1971-72. For the assessment year 1970-71, the development rebate claimed was Rs. 1,90,671 but as the profit available for adjustment was only a sum of Rs. 13,408, the rebate was partly adjusted and the balance of Rs. 1,77,263 was carried forward for the assessment year 1971-72. During that year also, there was a part adjustment of the rebate and the balance of Rs. 64,045 was carried forward. For the assessment year 1974-75, the assessee claimed that it was a priority industry and was entitled to development rebate at the higher rate of 35 per cent. The AAC accepted the plea of the assessee for the assessment year 1974-75 as well as for the earlier years and directed the ITO to recompute the development rebate at the rate of 35 per cent. On appeal, the Tribunal confirmed the AAC's order. On reference, the revenue contended that since the assessee had not sought recomputation of development rebate at the rate of 35 per cent within a period of four years prescribed for rectification under section 154, the claim of the assessee could not be allowed. Held In view of section 34(3)(a ), it is quite sufficient if the assessee creates a reserve in respect of each of the years to cover three-fourth of the…

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