TMI Blog1963 (4) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1960-61, the petitioner company claimed a carried forward loss of ₹ 49,446. This sum included an amount which represented the development rebate which had not been originally allowed in the assessment but which was later directed to be allowed by the Appellate Assistant Commissioner in appeal against the assessment for 1958-59. Together with this amount of development rebate, the total loss of profits came to ₹ 71,220 for the assessment year 1958-59. For the assessment year 1959-60 the total income available was a sum of ₹ 21,774. Deducting the loss carried forward from 1958-59, the assessee-petitioner claimed the balance of loss to be carried forward for the assessment year 1960-61 to be ₹ 49,446. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rebate in part. It is claimed that on a proper construction of the proviso newly inserted in section 10(2)(vib) of the Income Tax Act by the Taxation Laws (Amendment) Act of 1960, which came into force on April 1, 1960, the Income Tax Officer was right in disallowing any portion of the unabsorbed depreciation loss from being carried forward and adjusted against the profits or gains of the business. It is this contention that principally calls for determination. 3. We may at first dispose of the first contention raised by the department that the procedure by way of a petition under article 226 is not a proper remedy. We are not disposed to accept this contention at this stage of the proceedings. The petition has been admitted by this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the year. The department at first contended that by reason of the explanation to section 10(2)(vi) introduced in 1958, no portion of the development rebate could be adjusted against subsequent profits. But, during the course of the arguments, Mr. Ranganathan fairly conceded that the Explanation introduced in 1958 would not apply. But he claimed, nevertheless, that the unabsorbed development rebate could retain its distinct character for the purpose of adjustment in future years and cannot merge into the general business loss. It is this contention that has to be examined. 5. Section 10(2)(vi) of the Act deals with depreciation of buildings, machinery, plant or furniture. Clause (via) provides for additional depreciation allowance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development rebate for adjustment in succeeding years. As stated already, Mr. Ranganathan, for the department who initially contended that the method of adjustment of this development rebate against the profits should follow the provisions of Explanations 1 and 2 conceded that this Explanation 1 applies only to the case of machinery or plant installed after the 31st day of December, 1957, and Explanation 2 would also deal only with the development rebate allowed in accordance with the provisions of Explanation 1. In terms, therefore, these Explanations will have no application to machinery or plant installed before the 31st day of December, 1957. 6. The next contention was that by the Taxation Laws (Amendment) Act, 1960, a proviso was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department is briefly as below : 10. The allowances granted under clause (vi), (via) and (vib) are not expenses incurred by the assessee in the running of his business. While an expenditure properly incurred for the purpose of the business goes to reduce the gross receipts of the profits, it is argued that an allowance cannot be given a similar scope. By way of analogy, Mr. Ranganathan refers to proviso (b) to section 10(2)(vi), which enacts that if full effect cannot be given to depreciation allowance in any year for the reason that there are no profits or gains chargeable for the year or the profits or gains chargeable are less than such depreciation allowance, then such depreciation allowance is permitted to be carried forward subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation allowance covered by section 10(2)(vi) and incorporated a specific method of adjustment of that allowance in succeeding years, keeping the identity of the sum represented by such depreciation allowance distinct from other allowances, it has not thought fit to provide likewise in the case of development rebate. When once the development rebate is granted, it constitutes an allowance which has to be deducted from the gross profits of the business. Thereafter, the balance whether it represents a net profit or a net loss, is nothing more than the computation of the income and, in the absence of any provision analogous to that contained in the proviso to section 10(2) (vi), we cannot accept the contention of the learned counsel that any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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