TMI Blog1996 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting period was the year ended March 31, 1971. The following question of law was referred to the High Court (see [1978] 113 ITR 729) under section 256(1) of the Income-tax Act, 1961 (page 730) : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to development allowance at 50 per cent. on the sum of Rs. 71,500 being a part of the expenditure incurred during the assessment years 1966-67 and 1967-68 on 1967 tea clearing under the provisions of section 33A of the Income-tax Act for the assessment year 1971-72 ? " Section 33A of the Income-tax Act, 1961, provides for development allowance for clearing land and planting of tea bushes by a tea company. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not covered by the claim in that year of Rs. 71,500. In 1969, there was another clearing of 3.59 hectares for which 1971-72 would be the 2nd year. The expenses incurred were Rs. 33,861. In that year, the company claimed development allowance on the following figures : 1967 clearing : Rs. Unclaimed expenses of 1967 and 1968 71,500 Expenses for 1969 and 1970 1969 clearing : 62,004 1st and 2nd year expenses 33,861 1,67,365 50 per cent. thereof 83,682 The company had created a reserve of Rs. 70,000." For the assessment year 1971-72, the Income-tax Officer allowed the claim in respect of the 1969 clearing, i.e., the expenses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation was not final. Sub-clause (b) provided that "development allowance shall again be computed with reference to the actual cost of planting". Thus, sub-clause (b) contemplated a recomputation of the actual cost of planting. The High Court was of the view that if after the computation, it was found that the recomputed amount exceeded the amount allowed as deduction under clause (a), the excess will have to be allowed as deduction. This provision, according to the High Court was mandatory. The High Court, therefore, concluded that the claim of the assessee should have been allowed by the Tribunal, The question referred to it was answered in the negative and in favour of the assessee. The Commissioner of Income-tax has now come in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction in respect of the third succeeding previous year next following the previous year in which the land has been prepared for planting or replanting, as the case may be : Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and no deduction shall be allowed under clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the lst day of April, 1970." Sub-section (2) provides for set-off and carry forward of unadjusted development allowance to the following assessment years. Sub-section (3) provides that the deduction under sub-section (1) shall be allowed only if the prescribed particulars had been furnished by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year. The aggregate amount of the costs on the aforesaid heads has to be reduced if any of these costs has been met directly or indirectly by any person or authority. In other words, if any financial assistance or subsidy or any other form of aid is received from the Government or any other agency or person, that will go to reduce the amount of costs which will form the basis of calculation of development allowance. All these things may not take place in one particular year. The very definition of "actual cost of planting" indicates that a span of four years has to be taken into account for the purpose of computation of development allowance. Section 33A(1)(a) and (b) makes it clear that deduction on account of development allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again on the basis of the actual cost of planting tea bushes at the second stage in the assessment of the third succeeding previous year reckoned from the previous year in which the land was prepared for planting or replanting. There is nothing in section 33A to suggest that development allowance for expenditure incurred in respect of the first two years must be calculated and claimed at the very first stage, i.e., at the stage of the second year of assessment after planting of tea bushes. Because of the protracted work involved in the preparation of the land, planting of seeds, cutting and nurturing nurseries and also the cost of planting and replanting of tea bushes as well as the cost of upkeep thereof besides various other factors like ..... X X X X Extracts X X X X X X X X Extracts X X X X
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