TATA IRON AND STEEL COMPANY LIMITED Vs. UPADHYAYA N C

JUDGEMENT

(1.) THESE two petitions have been filed by Tata Iron & Steel Co. Ltd., against the two Income -tax Officers, Companies Circle, Bombay, and against the Union of India. In the first petition it challenges three rectification notices under section 154 of the Income -tax Act, 1961 (hereinafter referred to as 'the Income -tax Act'), for the assessment years 1965 -66, 1966 -67 and 1967 -68 and the rectification orders made pursuant to those notices and notices of demand demanding Rs. 30,03,872 by way of additional taxes. In Petition No. 226 of 1973 the petitioner challenges the rectification notice dated March 12, 1973, in respect of the assessment year 1968 -69.

(2.) THE facts leading to these petitions are as follows : For all the four years covered by the two petitions the petitioner had created some development rebate reserve and claimed development rebate under section 33 of the Income -tax Act. Apart from of the plant and machinery installed by the petitioner during these years, it had also installed some rolling mill rolls. It is admitted that during these four years the petitioner had not created the development rebate reserve after taking into consideration the rolling mill rolls installed by it and it had not claimed any rebate in respect of the same. The petitioner explains that the commission was due to the fact that it was not the practice of the income -tax authorities then to allow development rebate in respect of rolling mill rolls and that the income -tax authorities did not include these rolls in the expression 'plant and machinery'. It appears that some sugar mills contended that rolling mill rolls installed by them were as much plant and machinery as they other item of plant and machinery. The contention was considered by the Central Board of Direct Taxes, Government of India, who on November 16, 1968, issued a circular which is exhibit A to the petition and directed all Income -tax Officers to allow development rebate on the cost of rolling mill rolls.

(3.) IN our judgment dated April 25, 1973, in Miscellaneous Petitions No. 184 of 1973 Indian Oil Corporation v. S. Rajagopalan, we have held that an assessee is not bound to create development rebate reserve during the year of installation of plant and machinery if there is no profit in that year and that it is sufficient if the reserve is created when there is profits and, therefore, development rebate is actually allowed. In the said case we did not decided the other points as to the time of creation of development reserve and left those question for decision in appropriate proceedings as they did not arise in the matter then before us.