WEST LAIKDIHI COAL CO LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. The question is whether the assessee, had to create a reserve fund out of its profits to be eligible for development rebate, under Section 10(2)(vib) of the Indian Income-tax Act, 1922.

(2.) Let us, therefore, at the outset, set out the relevant provisions of the Act. These provisions are :

(3.) Before the Tribunal, the assessee contended that there was no taxable income for the assessment years 1960-61 and 1961-62. There could, according to the assessee, be no debit to the profit and loss account for the purpose of creating the reserve in these years. The assessee further pointed out that as it was permissible to carry forward an unabsorbed development rebate under similar circumstances, it should be presumed that the creation of the reserve was not called for when the total income was nil or was a minus figure. The contention of the department before the Tribunal was that the assessed figure had nothing to do with the required reserve being created because the terms of the provisions of Section 10(2)(vib) required the department to see whether there were sufficient net profits as per audited accounts of the years to justify the creation of reserve. The departmental representative submitted to the Tribunal that, having regard to the book profits of Rs. 14,663 and Rs. 76,476 for the relevant years, the assessee could have provided for the necessary reserves.