Law:

Section:

Section 33 of the Income-tax Act, 1961 [Corresponding to section 10(2)(vib) of the Indian Income-tax Act, 1922] - Development rebate - Assessment year 1960-61 - Whether carry forward of development rebate is allowed only if failure to create a reserve on part of assessee is on account of fact that there is no income available in assessee's hands in relevant year out of which requisite reserve or any part of it could actually be created - Held, yes - Whether if in a particular year there is income available according to assessment but whole or portion of it has been distributed as dividends or as profits and for that reason assessee failed to create a reserve as required by proviso to section 10(2)(vib) of 1922 Act, to extent of such failure assessee would be disentitled to carry forward development rebate - Held, yes FACTS The assessee-company installed the machinery in the year ended on 31-3-1958 but the production had been commenced on January 1958. While completing the assessment the ITO disallowed the development allowance in respect of the first two years but allowed in full for the assessment year 1960-61. The ground for disallowance was that there was no assessment for the first year and there was no claim made for the assessment year 1959-60. The Tribunal found that the assessee had, as a matter of fact, furnished on 30-12-1960, the necessary particulars and that as it happened to be before the assessment was competed, it was sufficient compliance. The Tribunal further held that since the assessee had created a reserve of Rs. 7,719 in the previous year, it would be entitled to development rebate of Rs. 10,292 to be brought forward and adjusted against the profits of the assessment year 1960-61. But, as no corresponding reserve had been created for the balance of the claim for rebate for the assessment year 1959-60, the Tribunal sustained the order of the AAC to the extent of Rs. 1,18,342 disallowed for carrying over. On reference: HELD Unless the two conditions in the first part of the proviso to section 10(2)(vib) of the 1922 Act are satisfied, no development rebate can actually be allowed. As to the first condition when the particulars should be…

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