Patna High Court
Commissioner Of Income-Tax vs Arjun Prasad on 24 October, 1990
Equivalent citations: 1991(39)BLJR475, [1991]190ITR179(PATNA)
JUDGMENT G.C. Bharuka, J.
1. The Tribunal has referred the following two questions of law for the opinion of this court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was entitled to claim development rebate for the assessment year 1974-75 when the development rebate had not been quantified in the assessment year 1973-74 ?
(2) Whether the quantification of development rebate is essential in the relevant year before it is claimed as unabsorbed in any subsequent year ?"
2. Relevant facts giving rise to the above questions of law are being stated hereinafter. The present reference relates to the assessment year 1974-75. During this assessment year, the assessee had claimed deduction of Rs. 13,752 as unabsorbed development rebate which he had carried forward from the earlier assessment year 1973-74. The Income-tax Officer rejected the claim pertaining to the said deduction on the ground that, in law, the assessee did not furnish any return of his income for the assessment year 1973-74 since the same was filed beyond the period prescribed under Section 139(4) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"). According to the Income-tax Officer, since the return was invalid, therefore, no assessment of profit or loss of the asses-see could be made for the assessment year 1973-74 and, therefore, there was no quantification of the development rebate admissible during this period. Therefore, according to him, there was no occasion for carrying forward the unabsorbed development rebate as an admissible deduction from the income of the assessment year 1974-75. The assessee preferred an appeal to the Appellate Assistant Commissioner and, on having failed to get any relief on this count, he preferred a further appeal to the Tribunal. The Tribunal held that the assessee is entitled to the deduction as claimed by him.
3. On facts, the Tribunal has held that from the trading as well as the profit and loss account filed by the assessee during the assessment year 1973-74, it transpired that the assessee had created a development rebate reserve in the profit and loss account to the extent of Rs. 15,123 and, in that year, there was net loss of Rs. 34,751. During the assessment year 1974-75, as per the profit and loss account, there was a profit of Rs. 20,006 and the Income-tax Officer had assessed the income at Rs. 26,517. Therefore, during this period, there was sufficient income to absorb the development rebate carried forward from the earlier assessment year 1973-74.
4. Sub-section (1) of Section 33 provides that development rebate may be claimed as deduction in respect of new machinery or plant installed after March 31, 1964, which is owned by the assessee and is wholly used for the purpose of business carried on by him and that allowance of the deduction is subject to the provisions of Section 34 of the Act. Clause (a) of Subsection (3) of Section 34 of the Act provides that 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 for distribution by way of dividend or profits or for remittance outside India as profits or for the creation of any asset outside India. Section 33(2) of the Act further provides that, where the total income of an assessee before deduction of the development rebate is nil or less than the full amount of the development rebate admissible for the assessment year, the development rebate shall be allowed for such an amount as is sufficient to reduce the said total income to nil. The balance of the unabsorbed development rebate shall be carried forward and deducted from the total income, of the following assessment year to the extent that there is a positive income after set off of unabsorbed loss and unabsorbed depreciation, if any. The balance, if any, will be carried forward and set off in a similar manner up to eight assessment years succeeding the year of the installation of plant or machinery.
5. In the present case, it is an admitted position that the assessee had created the required development rebate reserve. As per the findings of the Tribunal, it is also an ascertained fact that, during the assessment year 1973-74, as per the profit and loss account, there was a loss and, therefore, there was no occasion for absorbing the deduction admissible on account of development rebate. As a consequence, as provided under Section 33(2) of the Act, the assessee was entitled to carry forward the unabsorbed development rebate to the succeeding assessment year, i.e., 1974-75, as has been done in the present case and in law, the same is required to be allowed as a deduction from the total income of this assessment year. The Income-tax Officer denied this benefit to the assessee only on the ground that, in the absence of a valid return, no assessment was made for the assessment year 1973-74 and, therefore, the amount of development rebate was not quantified by the authorities under the Act by way of making assessment for that assessment year, and, therefore, the assessee was not entitled to carry forward of the development rebate, as claimed. In substance, according to the Income-tax Officer, on the facts of the present case, the assessee lost his right of claiming deduction on account of development rebate once for all. In my view, the reasoning given by the Income-tax Officer is not supported by the provisions contained under the Act. Once the assessee fulfills the statutory conditions for becoming entitled to deduction on account of development rebate, the carry forward of unabsorbed development rebate is not dependent on any quantification by the Income-tax Officer by way of making an assessment for that assessment year. The amount of deduction which is admissible can be ascertained by reference to the books of account maintained by the assessee while the assessment is being made for the year in which the deduction is actually being allowed. In my view, the Tribunal has rightly held that the assessee was entitled to the deduction in question for the assessment year in question.
6. In the result, my answer to question No. 1 is in the affirmative, i.e., against the Department and in favour of the assessee. The answer to question No. 2 is in the negative, i.e., again against the Department and in favour of the assessee. On the facts of the case, there shall be no order as to costs. Let a copy of this order be remitted to the Income-tax Appellate Tribunal, Patna Bench, under the seal of this court.
G.G. Sohani, C.J.
7. I agree.