TMI Blog1989 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the court was delivered by PATHAK C. J. 1 . -This appeal by certificate granted by the High Court of Gujarat is directed against the judgment of the High Court on the following questions referred to it by the Appellate Tribunal : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee cannot be denied the benefit of carry forward of development rebate ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing that the Income-tax Officer should determine the development rebate and such development rebate should be allowed to be carried forward and set off when profits are available and if, in that year, the assessee fulfils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and is wholly used for the purposes of the business carried on by him, and that the allowance of the deduction is subject to the provisions of section 34. Clause (a) of subsection (3) of section 34 provides that the deduction referred to in section 33 shall not be allowed unless an amount equal to 75 per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a condition for securing the benefit of development rebate and if that condition is not satisfied, we fail to see how the deduction on account of development rebate can be claimed at all. Learned counsel for the assessee relies on West Laikdihi Coal Co. Ltd. v. CIT [1973] 87 ITR 501 (Cal) and CIT v. Modi Spinning and Weaving Mills Co. Ltd. [1973] 89 ITR 304 (All). Those were cases decided under the provisions of the Indian Income-tax Act, 1922, and there was no Explanation such as the one we have before us. Reference was made to the decision of this court in Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512. In that case, however the question was whether the creation of a reserve in compliance with section 17 of the Banking Companies Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, reliance was placed on Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO [1973] 92 ITR 241, where the Bombay High Court has held that there was no obligation on the assessee to create a reserve in the year of installation if there was no taxable income in the relevant year. Some of the submissions addressed in that case may be set forth in detail. A powerful argument was addressed by learned counsel for the assessee and it was pointed out that the expression "shall be allowed" in clause (a) of sub-section (1) of section 33 indicated that the development rebate is to be assessed and thereupon it becomes allowable, and that sub-section (2) of section 33 which provides for the allowance of development rebate mentions that the sum "t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or plant is installed or first put to use. The development rebate contemplated by sub-section (1) of section 33 cannot be allowed as deduction unless a reserve account has been created in the previous year in which the installation or first use occurs. Any doubt in so reading the provisions because of want, or insufficiency, of profit in such previous year has been removed by the Explanation to clause (a) of sub-section (3) of section 34. The significance of the words "actually allowed" in clause (a) of sub-section (3) of section 34 has been considered by the High Court in the judgment under appeal and we are in entire agreement with the view taken by the High Court in that regard. A number of other cases have also been placed before us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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