SEN - (1.) THIS case relates to the assessment year 1970-71 for which the relevant accounting period was the year ended 31-3-1971. The following question of law was referred to the High Court under Section 256 (1) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the asseessee was not entitled to Development Allowance at 50 Per Cent on the sum of Rs. 71,500.00 being a part of the expenditure incurred during the assessment year 1966/67 and 1967/68 on 1967 Tea clearing under the provisions of Section 33A of the Income-tax Act for assessment year 1971-72?"
(2.) SECTION 33-A of the Income-tax Act, 1961 provides for development allowance for clearing land and planting of tea bushes by a tea company. In this case, the clearing of land and planting of the tea bushes was done in July, 1967 (within the accounting year ended on 31-10-1967). The expenses for that year and the subsequent year ended on 31-10-68 were taken into consideration in the assessment for the assessment year 1969-70 for the purpose of computation of development allowance under SECTION 33-A (1) (a). The Tribunal found:- "The Company chose to claim the allowance in respect of 1965 clearing fully, i. e., Rs. 30,846.00 and in respect of 1967 clearing although they had incurred an expenditure of Rs. 89,800.00 and entitled to Rs. 44,900.00 they restricted the claim to the difference between Rs. 40,000.00 the total claim for which they had provided reserve and Rs. 30,846.00 the claim of 1965 clearing. The figures are as follows :- 1967 Tea clearing - Plantation July 1967 JUDGEMENT_59_8_1996Html1.htm To this was added the expenditure of 1st and 2nd year not covered by claim in that year of Rs. 71,500.00. In 1969, there was another clearing of 3.59 hectares for which 71-72 would be the 2nd year. The expenses incurred were Rs. 33.861.00. In that year, the company claimed development allowance on the following figures:- JUDGEMENT_59_8_1996Html2.htm For the assessment year 1971-72, the Income-tax Officer allowed the claim in respect of 1969 clearing, i. e., the expenses in respect of the first and second year at that clearing. For the 1967 clearing, the assessee claimed that a part of the expenses of the first and second year (1967 and 1968) which was neither claimed nor allowed in the earlier assessment years should be taken into consideration. The Income-tax Officer disallowed the claim. The Appellate Assistant Commissioner agreed with the Income-tax Officer and observed that in respect of the expenses actually incurred in the fist two years, the assessee had to claim deduction in the second year and only in respect of the expenses incurred thereafter and not taken into account earlier, extra allowance could be claimed in the fourth year. If the assessee chose to claim only a part of what he was actually entitled to in the first year, he could not claim the balance in the fourth year. On further appeal, the Tribunal upheld the order of the Appellant Assistant Commissioner. The Tribunal was of the view that development allowance for the first two years should have been claimed in the year 1969-70. The Tribunal pointed out that the amount allowable under clause (a) of Section 33A (1) was not limited to the amount which either the Income-tax Officer cared to allow or the assessee cared to claim. The amount which was allowable depended upon the expenses incurred in the first and second year.
(3.) THE High Court held that Section 33-A (1) (a) dealt with "computation at the first instance" of the development allowance. This implied that computation was not final. Sub-clause (b) provided that "development allowance shall again be computed with reference to the actual cost of planting." Thus, sub-clause (b) contemplated recomputation of actual cost of planting. THE High Court was of the view that if after the computation, it was found that recomputed amount exceeded the amount allowed as deduction under clauses (a), the excess will have to be allowed as deduction. This provision, according to the High Court was mandatory. THE High Court, therefore, concluded that the claim of the assessee should have been allowed by the Tribunal. THE question referred to it was answered in the negative and in favour of the assessee. THE Commissioner of Income-tax has now come in appeal against the decision of the High Court. Section 33A (1) provides :- "33-A. Development allowance.- (1) In respect of planting of tea bushes on any land in India owned by an assessee who carries on business of growing and manufacturing tea in India, a sum by way of development allowance equivalent to- (i) where tea bushes have been planted on any land not planted at any time with tea bushes or on any land which had been previously abandoned, fifty per cent of the actual cost of planting; and (ii) where tea bushes are planted in replacement of tea bushes that have died or have become permanently useless on any land already planted, thirty per cent of the actual cost of planting, shall subject to the provisions of this section, be allowed as a deduction in the manner specified hereunder, namely:- (a) the amount of the development allowance shall, in the first instance, be computed with reference to that portion of the actual cost of planting which is incurred during the previous year in which the land is prepared for planting or replanting, as the case may be and in the previous year next following, and the amount so computed shall be allowed as a deduction in respect of such previous year next following, and (b) thereafter, the development allowance shall again be computed with reference to the actual cost of planting, and if the sum so computed exceed the amount allowed as a deduction under Clause (a), the amount of the excess shall be allowed as a deduction in respect of the third succeeding previous year next following the previous year in which the land has been prepared for planting or replanting, as the case may be : Provided that no deduction under Clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and no deduction shall be allowed under Clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970. ;