Patna High Court
Commissioner Of Income-Tax vs Tata Robins Frazer Ltd. on 21 November, 1985
Equivalent citations: [1987]163ITR886(PATNA)
JUDGMENT Uday Sinha, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961. The assessee is a public limited company. In the assessment year 1970-71, the company filed return showing income at nil. The assessee had claimed depreciation of Rs. 11,37,531, but later on, it revised its claim for depreciation and filed another depreciation chart in which the assessee did not claim extra shift allowance on certain machineries. Rs. 1,31,230 was thus excluded from the claim. It thus withdrew its claim on account of extra shift allowance. The Income-tax Officer allowed the claim of depreciation as originally claimed. The income for the year was returned at Rs. 7,19,590. After setting off past losses and unabsorbed depreciation of the earlier years, the Income-tax Officer determined the income at nil. The assessee had not created any reserve for claiming development rebate. The Income-tax Officer, therefore, held that the claim of development rebate at Rs. 1,51,171 could not be allowed because no reserve as required by law had been created by the assessee.
2. In regard to extra shift allowance, the Appellate Assistant Commissioner in appeal, held that extra shift allowance of Rs. 1,31,230 should not be allowed in the relevant assessment year. In regard to development rebate, he directed that the development rebate should be quantified and it should be carried forward as a claim to the next year.
3. The Appellate Tribunal concurred with the view of the Appellate Assistant Commissioner in regard to the extra shift allowance. The assessee having withdrawn its claim of extra shift allowance, it could not be forced to claim it. The Department, therefore, could not compel the assessee to claim extra shift allowance. The Tribunal also upheld the view of the Appellate Assistant Commissioner and the claim of the assessee in regard to development rebate and extra shift allowance. It may be mentioned that the stand of the Revenue before the Tribunal as before this court was that the statutory reserve not having been created, development rebate could not be allowed nor could be carried forward. Hence, the questions referred to us for our opinion are as follows :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee should withdraw the claim of extra shift allowance before the Income-tax Officer and that he could not allow the claim after such withdrawal ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the claim for development rebate should be quantified in the year under consideration to carry forward the claim to the succeeding years even if no reserve had been created as contemplated under Section 34 of the Income-tax Act ?"
4. The first question referred to us presents no difficulty. Mr. Dinesh Vyas, learned counsel for the assessee, submitted that the order of the Income-tax Officer in regard to extra shift allowance did not hurt the assessee very much. He, therefore, stated that he did not dispute the correctness of the order of the Income-tax Officer. He stated that the order of the Income-tax Officer may not affect the tax liability and, therefore, question No. 1 need not be answered. Upon the concession of Mr. Vyas, the order of the Income-tax Officer is upheld. The Income-tax Officer will proceed to calculate on the basis of the order passed by him. The Income-tax Appellate Tribunal and the Appellate Assistant Commissioner will give effect to this order of ours by which the order of the Income-tax Officer has been accepted to be correct. In view of the concession, we do not consider it necessary to answer question No. 1.
5. The next question falling for consideration is whether the development rebate could be quantified and carried forward to future years. Since Mr. B. P. Rajgarhia, learned senior standing counsel, has fought this issue tooth and nail, the question referred to us has to be considered in some detail.
6. The assessee-company had installed plants and machineries worth Rs. 4,31,924 during the relevant accounting year. The assessee claimed 35%, i.e. Rs. 1,51,171 as development rebate. The Income-tax Officer rejected the claim of development rebate in the following words :
"Development rebate.--The assessee has claimed development rebate on plant and machinery Rs. 4,31,924 at 35% at Rs. 1,51,171. This cannot be allowed because no reserve had been created by the assessee as provided in the Income-tax Act. After set off of past losses and unabsorbed depreciation, income is determined at nil.
Assessed under Section 143(3) at nil."
7. It is not in controversy that no reserve had been created during the relevant accounting year. It is also not in controversy that the assessee was assessed at nil income. The assessee also does not contend that it was entitled to be allowed development rebate in the said assessment year. Mr. Vyas for the assessee only contended that it had to be quantified and carried over for eight future years. The real controversy between the parties is whether there could be a quantification of the development rebate and whether it could be carried forward. Learned senior standing counsel, Income-tax Department, contended that no quantification in respect of the development rebate could be done nor could any sum be carried forward.
8. The question thus posed is this. Where no statutory reserve as contemplated by Section 34(3) has been created, can there be quantification and carrying forward of the development rebate in the year of installation of the machineries ?
9. Section 33 of the Act provides for allowance of development rebate where new machinery or plant has been installed. The provisions of Section 33 are subject to the conditions laid down in Section 34 of the Act. Section 34(1) deals with conditions for allowance of depreciation allowance with which we are not concerned. Section 34(3) lays down the conditions for grant of development rebate. It provides that the development rebate referred to in Section 33 shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next. The said reserve can be utilised by the undertaking for all purposes other than (i) for distribution by way of dividends or profits ; or (ii) for remittance outside India as profits or for the creation of any asset outside India. It would be useful here to quote Section 34(3)(a) so far as is relevant.
"(3)(a) The deduction referred to in Section 33 shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than-
(i) for distribution by way of dividends or profit ; or
(ii) for remittance outside India as profits or for the creation of any asset outside India : ...
Explanation.--For the removal of doubts, it is hereby declared that the deduction referred to in Section 33 shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account aforesaid exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid) in accordance with the profit and loss account."
10. From the above, it will be observed that development rebate shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed, is debited. The words "shall not be allowed" and "to be actually allowed" are rather significant. The entire confusion arises on account of non-appreciation of the significance of the words "allowed". It is manifest that mere quantification is not allowance. When a certain sum is only quantified, but the benefit of quantification is not extended to the assessee, it cannot be said to have been allowed. Section 34(3) bars only allowance. There should, therefore, be no difficulty in holding that when development rebate is quantified and carried forward for succeeding years, development rebate has not been allowed. Mere quantification is not allowance.
11. The question then arises why should there be quantification and carrying forward. That has to be done in terms of Section 33(2) of the Act which reads as follows :
"(2) In the case of a ship acquired or machinery or plant installed after the 31st day of December, 1957, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be, (the total income for this purpose being computed without making any allowance under Sub-section (1) or Sub-section (1A) of this section or Sub-section (1) of Section 33A or any deduction under Chapter VI-A or Section 280-0) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under Sub-section (1) or Sub-section (1A), as the case may be,--
(i) the sum to be allowed by way of development rebate for that assessment year under Sub-section (1) or Sub-section (1A) shall be only such amount as is sufficient to reduce the said total income to nil ; and
(ii) the amount of the development rebate, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however, that no portion of the development rebate shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be."
12. The above provision lays down how much rebate may be allowed. Clause (i) of Section 33(2) provides that the sum to be allowed shall be only such amount as is sufficient to reduce the total income to nil. Question is what will happen to the balance of the sum claimed as development rebate by the asses-see. The answer is to be found in Clause (ii) which lays down that the amount of the development rebate, to the extent that it has not been allowed, shall be carried forward for successive years, not exceeding eight years from the year of installation of the machinery as is sufficient to reduce the total income to nil. It is axiomatic, therefore, that until the development rebate is quantified in the relevant assessment year after the installation of the machinery, there cannot be any question of carrying forward of the rebate. If it is not quantified, nothing will be available for carrying forward and the assessee will be denied the benefit of the rebate which the law-makers in their wisdom have considered it appropriate to extend in the interest of promoting trade and industry. According to learned senior standing counsel, the statutory reserve in terms of Section 34(3) must be created in the year of installation itself otherwise the reserve cannot be created as the year of installation happens to be a year of loss. According to him, therefore, there cannot be any quantification nor carrying forward and, therefore, no development rebate can be allowed in any year. The submission urged on behalf of the Revenue does not appear to be sound as I shall presently show,
13. Let us test the submissions urged on behalf of the Revenue. It is contended that statutory reserve equal to seventy-five per cent of the rebate claimed must be created by debit to the profit and loss account. From where is this transfer to be made. If the total income of the undertaking is a loss, there is nothing to be transferred to the profit and loss account. Surely, the undertaking is not expected to raise a loan for that purpose. If that were intended, it would take away the entire purpose of granting rebate. Mr. Rajgarhia for the Revenue did not contest the proposition that if there is a loss, there cannot be any transfer to the profit and loss account for creating the reserve. He, however, contended that in the computation of the total income, the assessee cannot adjust its losses before creating development reserve, Is that right ? Is not an assessee entitled to adjust its losses of earlier years in computing the total income. Mr. Rajgarhia submitted that in the year of installation of the machinery the company earned profit, but it was reduced to loss on account of setting off past losses and unabsorbed depreciation because it adjusted its depreciation by adjusting the losses of earlier years. That, according to Mr. Rajgarhia, the assessee could not do. The question is, is the assessee not entitled to adjust past losses and depreciation in computing its total income ? The answer clearly must be in the affirmative. Section 72 of the Act clearly permits an assessee to set off losses of earlier years against profits and gains of any business carried on by him and assessable for the assessment year. The assessee was, therefore, fully justified in setting off losses and depreciation allowance which resulted in reducing the total income to nil. The total income being nil, there was no scope for creating the statutory reserve in terms of Section 34(3) of the Act
14. From the above discussion it must follow that non-creation of statutory reserve is a bar to allowance of development rebate, but is no bar to quantifying rebate in terms of law and carrying it forward. The expression "to be actually allowed" in Section 34(3)(a) clearly implies that certain sums will be allowed in future as development rebate--in whole or in part. If no reckoning is done, what is "to be actually allowed" cannot be ascertained. In that view of the matter, I am clearly of the view that the sum to be actually allowed has to be reckoned whether statutory reserve has been created or not in the relevant assessment year in which the machinery was installed. It must, however, be held that the development rebate will be allowed only in the year the statutory reserve is created. The outer limit for creation of the reserve and availing of the privilege of development rebate must be confined to eight years. I have, therefore, no difficulty in holding that an assessee in order to get development rebate must create the statutory reserve. So long as that reserve has not been created, it will not be allowed. It must, however, be quantified in the relevant assessment year and be carried forward. It will be allowed in the year statutory reserve is created and the outer limit for creation of the reserve and availing of the privilege of development rebate is confined to eight years.
15. The Explanation to Sub-section 3(a) of Section 34 further places the matter beyond all doubt. The Explanation clarifies clearly that development rebate is not to be denied only for the reason that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account as stipulated in Sub-section 3(a) exceeds the amount of profit of such previous year. In my view, therefore, the claim for development rebate has to be made by the assessee in the year of installation of the machinery. If in that year the total income is a loss, the statutory reserve need not be created. Statutory reserve not having been created, development rebate will not be allowed, but the rebate to be actually allowed in future will be calculated and carried forward to the next assessment year. The stand of the Revenue, therefore, that the statutory reserve must be created in the year of installation of the machinery in order to claim development rebate appears to be manifestly unsound. In Radhika Mills Ltd. v. CIT [ 1969] 74 ITR 661, a Division Bench of the Madras High Court laid down that the allowance of development rebate is always in respect of the year of installation and apart from creation of the requisite reserve, depends on and goes to reduce the available total income of that year or the following previous years. Their Lordships categorically laid down that if there is no such total income or it is a loss, there can be no allowance or rebate but it is to be carried forward to the following year. I am in respectful agreement with the views of the Madras High Court.
16. Another decision worthy of note on this point is in CIT v. Orissa Flour Mills (P.) Ltd. [1976] 104 ITR 682 where the Bench of the Orissa High Court presided over by R. N. Misra J. (as he then was) upheld the same view as I have discussed above in the following terms (p. 685) :
"Thus, while Section 33 lays down that development rebate is admissible and indicates the manner of calculation, Section 34(3)(a) imposes a further condition before development rebate can actually be allowed. In view of the statutory provisions that development rebate is admissible under certain contingencies and in case it is not set off, it can be carried forward for eight years following the year of assessment. Even if there be no satisfaction of the requirement of Section 34(3)(a) of the Act, the rebate has to be computed and has to be carried forward to be allowed in such year when the condition imposed by Section 34(3)(a) is satisfied."
17. The above again lays down that even if no reserve has been created, the computation and carrying forward of the claimed rebate has to be accomplished.
18. The most lucid exposition of the subject is to be found in Addl CIT v. Vishnu Industrial Enterprises [1980] 122 ITR 919 at page 922 where Satish Chandra C.J. of the Allahabad High Court observed :
"There is no express provision that the reserve must be created in the year for which the rebate is to be determined. The reserve can be created only if profits are earned ; else it will be forcing the assessee to create a reserve out of its capital or by borrowings, either of which events will defeat the object of enabling the company to accumulate funds to be used for its development."
19. His Lordship further laid down that the provisions of Section 34(3)(a) come into play at the time of actual allowance of the rebate. His Lordship observed (at p. 923) :
"Section 34(3)(a) opens--The deduction referred to in Section 33 shall not be allowed unless . ..' This provision comes into play at the time of actual allowance of the rebate. The conditions precedent should be complied with at that time. Before an assessee claims the deduction, he should create a reserve by debiting the profit and loss account and crediting the reserve account with the requisite amount of the money. This can be done only in the year in which profits are earned. The scheme of carrying forward unabsorbed development rebate postulated by Sub-section (2) of Section 33 can be achieved only if it is permissible to create reserve by making the requisite entries to the extent the income is able to absorb the rebate. The full reserve may not be created in a single year ; depending on the available income it may take more than one year to create the reserve to the full extent of the development rebate which is allowable, and which has already been determined.
The proper procedure is that the amount of the development rebate ought to be determined in the first year. Its actual adjustment will be dependent on the availability of income. In the case of loss, the determination has to be done in the first year ; the adjustments are to be actually made in subsequent years where profits are available."
20. It is not necessary to multiply authorities. The matter is beyond the pale of controversy.
21. The conclusion to which I have arrived in regard to creation of statutory reserve vis-a-vis allowance of development rebate becomes further clear if it is appreciated that Section 34(3)(a) only places an embargo upon allowance unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year. What is the import of the expression "relevant previous year" ? I have not the least doubt that it connotes the year in which the rebate is to be allowed, i.e., the year in which development rebate is to be allowed, the statutory reserve must have been created. An amount equal to seventy-five per cent. of the rebate to be actually allowed must have been debited to the profit and loss account of that year. I am supported in the view that I have taken by a Division Bench decision of the Delhi High Court in CIT v. Metal Forging P. Ltd. [1984] 149 ITR 259 where their Lordships observed that the "relevant previous year" referred not to the year of installation of the new plant or machinery, but to the year or years in which either the whole of the development rebate or a part thereof is actually allowed.
22. The only dissenting view is of the Gujarat High Court in CIT v. Mihir Textiles Ltd. [1976] 104 ITR 167. Their Lordships of the Gujarat High Court observed that the development rebate reserve can be created by mere book entry and that the crediting of the reserve fund must be done before the profit and loss account is closed. Their Lordships also observed that if development rebate reserve falls short of the required amount and the excess of reserve created in a subsequent year cannot be treated as setting off of the shortfall, in that case the rebate will not be allowable nor can it be carried forward. I cannot have any quarrel with the view that the rebate will not be allowed, but I regret, I find myself unable to accept as correct that it cannot be carried forward for the reasons which I have indicated earlier. The view propounded by the Gujarat High Court in Addl. CIT v. Shri Subhlaxmi Mills Ltd. [1975] 100 ITR 188 must be rejected for the same reason. The view of the Gujarat High Court was based upon a decision of the Supreme Court in Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512. Indian Overseas Bank's case does not militate against the proposition that development rebate cannot be computed and carried forward until the statutory reserve has been created. In the case before the Supreme Court, the position was that the assessee, a banking company had created a reserve in terms of Section 17 of the Banking Companies Act, 1949. The assessee claimed that the reserve fulfilled the requirements of section 10(2)(vib) of the Indian Income-tax Act, 1922, which is equivalent to Section 34(3)(a) of the 1961 Act. In that situation, their Lordships of the Supreme Court observed that the reserve contemplated by the Banking Companies Act was entirely different from the reserve contemplated under the Indian Income-tax Act, 1922, and since there was no reserve in terms of the Income-tax Act, 1961, development rebate could not be allowed. That is not the situation before us or in the view propounded by the Gujarat High Court. Further, another noteworthy aspect is that the Supreme Court held that rebate could not be allowed. In the instant case, we are not concerned with the allowance of rebate. It admits of no doubt that until a reserve is created, there can be no allowance of development rebate. But the question before us is whether it should be quantified in the assessment year relevant to the year of installation and whether it should be carried forward in the absence of the necessary statutory reserve. The Supreme Court was not dealing with this aspect of the matter. In that view of the matter, it is obvious that the Tribunal was justified in holding that the claim for development rebate should be quantified in the year under consideration and the claim be carried forward to the succeeding years even if no reserve had been created as contemplated under Section 34 of the Income-tax Act.
23. The question must be decided in favour of the assessee for yet another reason. In 1965, the Central Board of Direct Taxes issued Circular F. No. 10/49/ 65/ITA. I of October 14, 1965 by which the Central Board of Direct Taxes explained the position regarding the creation of statutory reserve. In that circular, it was explained that where the total income computed before allowing the development rebate was a loss, there would be no legal obligation to create any statutory reserve in that year, i.e., in the year of installation, and that the Income-tax Officer may condone genuine deficiencies in the matter of creation of reserve subject to the same being made good by the assessee by creating adequate additional reserve in the succeeding assessment year. This circular was subsequently withdrawn by Circular No. 469(?) bearing reference No. 228/8/72/ITA II, dated October 27, 1972. This circular was issued consequent upon the decision of the Supreme Court in the case of Indian Overseas Bank Ltd. [1970] 77 ITR 512. In terms of the October 1972 Circular, development rebate could not be claimed if no reserve had been created. The October 1972 circular was superseded by another circular of the Board dated December 31, 1975, bearing reference No. 228/8/72. In this latest circular, the Board directed that the direction of the Central Board of Direct Taxes at parts (b) and (c) in the circular of 1965 was not affected by the decision of the Supreme Court or by the decision of the Gujarat High Court and that all the completed assessments in terms of the 1965 circular need not be disturbed. The second direction was that the reassessment proceedings or rectification proceedings initiated under Section 147(3) or Section 154 or Section 263 of the Income-tax Act, 1961, consequent upon the decision of the Supreme Court in the case of Indian Overseas Bank Ltd. [ 1970] 77 ITR 512 and of the Board's circular of October, 1972, may be dropped. The third direction was that in appeals from such reassessment orders, the Revenue may concede in terms of the position specified in parts (b) and (c) of the 1965 circular. The fourth direction was that all assessments pending finalisation involving issues covered by parts (b) and (c) are to be completed as if the circular of 1965 on this point had not been superseded. The Board issued yet another circular bearing reference No. 228/8/72, dated January 30, 1976 (See [ 1976] 102 ITR (St.) 90) by which the position as clarified in the 1975 circular was reiterated. For the Board, thus, the position is that development rebate will not be denied if a statutory reserve is not created in the year of installation of the machinery. It will be quantified and carried forward for the year in which the reserve is created. In the instant case, the machinery was installed in 1971. The assessee created reserve in 1976 and the Department allowed the rebate in the corresponding year.
24. In view of the 1965 and 1975 circulars of the Board, Mr. Dinesh Vyas, for the assessee contended that the position clarified by the Board binds the Revenue, and, therefore, the Income-tax Officer was obliged to quantify and carry forward the development rebate since there was loss in the year of installation.
25. Mr. B. P. Rajgarhia, learned senior standing counsel, however, contended that the circular of the Board has no binding force. The stand of the Revenue hardly appears to have any substance. Apart from the circulars of 1965 and 1975, the Board issued yet another Circular No. 259 of July 11, 1979 (See [1981] 131 ITR (St.) 70) addressed to all Commissioners of Income-tax in which it was stated in paragraphs 3 and 4 as follows :
"3. After considering various aspects of the matter, the Board have decided that the requirements of the provisions of Section 33 and Section 34 (3) (a) of the Act will be considered to have been satisified if the accumulated reserve in respect of the said machinery or plant up to the year or years of actual allowance is equal to the 75 per cent. of the amount of development rebate to be actually allowed. This would mean that the condition for creation of requisite reserve would stand satisfied if the sum total of the reserve created either in the year of installation or use or in the subsequent year or years is equal to the requisite amount of 75 per cent. of the actual allowance of development rebate in any year or years.
4. Necessary instructions may be issued to the Income-tax Officers to complete the pending assessments on the lines indicated above. Past assessments should also be reviewed and the above noted stand be taken in the pending appeals, (emphasis* supplied)."
26. In Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198, the Supreme Court held that the circulars issued by the Central Board of Revenue would be binding on all officers and persons employed in the execution of the Act. The position in law enunciated by Gajendragadkar, C. J., was reiterated in Ellerman Lines Ltd. v. CIT[ 1971] 82 ITR 913. It is thus absolutely clear that the circulars of the Central Board of Direct Taxes issued in exercise of powers conferred upon it by Section 119 of the Act has statutory force and cannot be ignored. Apart from the fact that the statute itself conveys that non-creation of reserve in the year of installation is no bar to development rebate being allowed in succeeding years ( until eight years of installation), the circulars of the Central Board of Direct Taxes also has a binding effect and cannot be ignored. The view that I have taken in regard to the efficacy of the circulars mentioned above finds support in CIT v. T. S. Venkiteswaran [1979] 120 ITR 675 (Ker), Dodballapur Spinning Mills Ltd. v. CIT [1980] 121 ITR 94 (Kar), CIT v. U. P. Hotel Restaurants Ltd. [1984] 145 ITR 598 (All), CIT v. A'gro Insecticides & Allied Industries [1981] 127 ITR 796 (AP), CIT v. Metal Forging P. Ltd. [1984] 149 ITR 259 (Delhi) and Aeropolymers (P.) Ltd. v. CIT [1985] 151 ITR 158 (P&H).
27. Learned senior standing counsel placed reliance upon B. Rajagopala Naidu v. State Transport Appellate Tribunal, AIR 1964 SC 1573, and submitted that in quasi-judicial matters, the direction of the Board would be of no consequence. I regret, the decision of the Supreme Court in the case of B. Rajagopala Naidu, AIR 1964 SC 1573, was in an entirely different set of circumstances. The Supreme Court observed in that case that the impugned order issued by the State Government was not a statutory rule and, therefore, did not have the force of law. The position is different in the instant case. Circulars are issued by the Board in exercise of powers conferred by Section 119 of the Indian Income-tax Act. The reliance placed upon S. Rajagopala Naidu's case, AIR 1964 SC 1573, is, therefore, misplaced.
28. Learned counsel for the Department also placed reliance upon A. L. A. Firm v. CIT [1976] 102 ITR 622 (Mad). That case is also distinguishable. In that case, the Board had issued direction in regard to assessment in a particular case. That was struck down by the Supreme Court. Such a circular would obviously be in contravention of proviso (a) to Section 119(1) of the Act. This case also, therefore, can be of no avail to the Revenue.
29. Upon a consideration of the various aspects involved in the matter, I am of the view that the correct position in law is that in the years of installation of the machinery, the development rebate had to be quantified and has to be carried forward. This view of mine is based not only upon interpretation of Sections 33 and 34 of the Act, but also in view of the circular of the Central Board of Direct Taxes.
30. For the reasons stated above, I refuse to answer question No. 1 in view of concession of Mr. Vyas that the order of the Income-tax Officer was not harmful to the assessee. The Tribunal and the Appellate Assistant Commissioner will direct the Income-tax Officer to proceed to calculate on the basis of the order passed by the Income-tax Officer.
31. The second question referred to us is answered in favour of the assessee and against the Revenue. The Tribunal was correct in holding that the claim for development rebate had to be quantified in the year under consideration to carry forward the claim to the succeeding years although no reserve had been . created as contemplated by Section 34 of the Income-tax Act The reference is thus answered, with costs payable by the Commissioner of Income-tax, Patna, to the assessee. Hearing fee Rs. 250,
32. Let a copy of this judgment be transmitted to the Income-tax Appellate Tribunal in terms of Section 260 of the Income-tax Act, 1981.
Nazir Ahmad, J.
33. I agree.