ADDITIONAL COMMISSIONER OF INCOME TAX Vs. VISHNU INDUSTRIAL ENTERPRISES

JUDGEMENT

(1.) MESSRS. Vishnu Industrial Enterprises (Private) Ltd., Kanpur, the assessee, suffered losses in the assessment years 1967-68 and 1968-69. It, however, claimed development rebate in respect of plant and machinery installed in those years. The ITO repelled the claim on the view that the assessee had not debited the profit and loss account, nor created the development reserve. The Supreme Court decision in Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512 applied and no development rebate was allowable.

(2.) ON appeal, it was held that since there was no profit, development reserve could not be created, but the development rebate should have been calculated and allowed in a succeeding year in which the assessee earned profits and created the requisite reserve. The ITO was directed to determine the development rebate admissible to the assessee.

(3.) THE material provisions are Sections 33 and 34(3)(a) of the I.T. Act, 1961. Section 33(1)(a) allows a deduction, subject to Section 34, in respect of the previous year in which the ship or machinery or plant was installed, a sum by way of development rebate as specified in Clause (b). Clause (b) provides rates for different kinds of ship, machinery or plant. THE ship, machinery or plant should be owned by the assessee and be wholly used for purposes of business carried on by him.