J.V.GUPTA, J. - (1.) THIS is a petition under s. 256 (2) of the IT Act, 1961 (hereinafter referred to as the Act), relating to the asst. yr. 1967-68, filed by the CIT, Amritsar, by virtue of which, the following question of law is required to be referred to this Court: "Whether on the facts and in the circumstances of the case. The Tribunal is right in law in directing the ITO to compute and allow the development rebate on a sum of Rs. 7,87,666/- when the machinery was admittedly installed in July, 1965 during the previous year relevant to the asst. yr. 1966-67 and there is no finding to the effect that the machinery in question was put to use in the succeeding year."
(2.) THE Tribunal vide its order dt. 12th Jan., 1976, dismissed the application of the Department under s. 256 (1) of the Act, observing that the question of law as proposed in the present case did not arise out of the order of the Tribunal. The relevant observations are: "From the facts stated above, it is obvious that the question of law as proposed in the present reference application does not arise out of the order of the Tribunal. The question whether the machinery on which development rebate was directed to be allowed was put to use in succeeding years after it was installed in July, 1965, was neither raised nor was decided by the Tribunal and hence we decline to refer the question as proposed in the present reference application." Brief facts are that the assessee-company manufacture steel and runs a Rolling Mill. On 6th July, 1965, the assessee company installed an electric furnaces at a total cost of Rs. 7,87,696/-. For the asst. yr. 1966-67, during which the electric furnace was installed, the assessee did not claim any development rebate nor did it create any development rebate nor did it create any reserve on the ground that in that year the net result of the working of the company was a loss. The ITO actually determined a net loss of Rs. 71,536/- for the asst. yr. 1966-67, including unabsorbed depreciation of 29,036/-. In the assessment for the year 1967-68, the assessee created a reserve of development rebate amount to Rs. 2,13,152/- by debiting the P&L A/C. On the basis of the above reserve, the assessee claimed development rebate of Rs. 2,84,202/-. The ITO without discussing the claim of the assessee regarding the development rebate and without computing the amount of development rebate allowable to the assessee during the year under consideration rejected the claim of the assessee. In appeal before the AAC, the assessee again agitated this point, but it was again turned down by him. However, in second appeal before the ITAT, the assessee re-agitated the matter and the Tribunal accepted the same. The relevant observations in the order of the Tribunal are as under : "We find from the records that the net result of the working of the Company during the asst. yrs, 1967-68 and 1968-69 was a loss and under these circumstances it was not obligatory for the assessee to create any development rebate reserve (96 ITR 1--Tata Iron and Steel Co. Ltd. vs. N. C. Upadhaya and Anr.). However, the assessee has created the requisite reserve by debiting the same to the P&L A/C. In our opinion, even if the assessee had not created any reserve during the years under consideration it was still entitled to the claim of development rebate in respect of the new machinery and plant installed or brought into use by it. Of course, the development rebate could be allowed only during the years in which the assessee earned profit and it was only in those years that the assessee-company was under a legal obligation to create development rebate reserve equal to 75 per cent of the development rebate so claimed. At the same time the mere fact that the assessee created a reserve during the years under consideration when the assessee did not earn any profits would not disentitle the assessee to the claim of development rebate. This is obvious from the explanation to s. 34 (3) which has been reproduced above.
(3.) AFTER hearing the learned counsel for the parties, we are of the pinion that the question of law as claimed by the revenue before the IT Tribunal did not arise as such out of the order of the Tribunal. However, as regards the scope of calling for a reference under s. 256 (2) is concerned, both the learned counsel for the parties in support of their contention, have relied upon a decision of the Supreme Court in CIT Bombay vs. Scindia Steam Navigation Co. Ltd. {(1961) 42 ITR 589 (SC) The powers of this Court as pointed out by the Supreme Court are wide enough to direct the Tribunal to refer any question of law to this Court for its opinion once such question arises or is deemed to arise from its order. In our opinion question of law, though some what different, does arise from the order. Next it has also been brought to our notice that there is confict of authorities on the interpretation of s. 34 (3) (a) of the Act. Notwithstanding the confict this Court has taken the view that the Act does not contemplate any time limit for claiming development rebate under s. 34 of the Act. (See CIT Punjab vs. Sardar Singh Sachdeva {(1972) 86 ITR 387} followed in CIT, Patiala vs. Rita Mechanical Workds {(1977) 108 ITR 552} On the other hand, the contrary view taken by the Gujarat High Court in cases reported as Addl. CIT , Gujarat vs. Shri Subhlaxmi Mills Ltd. {(1975) CTR (Guj) 35 : (1975) 100 ITR 188 (Guj) and Keshavlal Vithaldas vs. CIT {(1976) 105 ITR 601 (Guj)}has not been preferred. There is, however, no final adjudication on this point by the Supreme Court as yet, as stated by the counsel for the parties at the bar.;