COMMISSIONER OF INCOME TAX DELHI I Vs. METAL FORGING PRIVATE LIMITED

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) at the instance of the department raises the following question for the opinion of the Court :

(2.) The facts briefly are these. The assessee is a private limited company which carries on the business of iron and steel forging. For the assessment year 1966-67 (accounting year ended April 30, 1965), it had claimed a development rebate of Rs. 15,121 but this was disallowed on the ground that the assessee had not created any development rebate reserve for the purpose. For this year, the assessee had suffered a net loss of Rs. 3,006 as per its books and the loss as finally assessed by the Revenue was Rs. 2,528. This reference relates to the assessment year 1967-68 (accounting year ended April 30, 1966). For this year the total income was assessed at Rs. 20,182, after allowing a development rebate of Rs. 16,695 on. the additions to machinery made during the relevant accounting year. No allowance was, however, made in respect of the carry forward development rebate of Rs. 15,121 which had" been unsuccessfully claimed for the assessment year immediately preceding.

(3.) The assessee appealed before the Appellate Assistant Commissioner against' the assessment for the assessment year 1967-68 and 'contended; inter alia, that the Income-tax Officer should have allowed as carried forward unadjusted development rebate of Rs. 15,121 claimed by the assessee for the assessment year 1966-67. The Appellate Assistant Commissioner admitted the assessee's claim and directed that the development rebate relating to the assessment year 1966-67, which could not be allowed in that year due to the paucity of profits, be allowed against the assessee's income for the assessment year 1967-68. The Appellate Assistant Commissioner found that though the assessee had been unable to create a development rebate reserve in the year ended April 30, 1965, in view of the paucity of profits, it had actually created the necessary reserve in its account for the year ended April 30, 1966. He held that the assessee should be allowed to carry forward the unabsorbed development rebate for the assessment year 1966-67 for- being adjusted against the profits for the assessment year 1967-68.