TMI Blog1986 (8) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... e year ending on June 30, 1962. The assessee claimed development rebate of Rs. 16,751 including development rebate of Rs. 5,740 on dies and tools. The Income-tax Officer disallowed the claim for rebate in respect of dies and tools and allowed development rebate of only Rs. 11,011, by his order of assessment made on January 11, 1964. The Appellate Assistant Commissioner, by his order made on June 17, 1964, allowed the assessee's appeal and allowed the claim of the assessee for development rebate in respect of dies and tools. This order was accepted by the Revenue. Subsequently, the Income-tax Officer made an order on March 27, 1965, under section 154 of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), holding that as the assessee had created development rebate reserve of Rs. 7,172 only, the maximum development rebate that may be allowed was Rs. 9,563, but he confined the development rebate reserve to be allowed to Rs. 9,550 in respect of machinery only, disallowing a sum of Rs. 7,201 out of Rs. 16,751 already allowed by the Appellate Assistant Commissioner. On appeal by the assessee, the Appellate Assistant Commissioner, by his order made on September 20, 1965, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the provisions of section 154(1A). This point is discussed in paragraph 6 of its order and the Tribunal held that the question of allowance of development rebate was definitely a matter which was considered and decided by the Appellate Assistant Commissioner and if the Department felt that he had failed to take into consideration a particular provision of the law in deciding the matter, it was open to the Department to have appealed against that order. On this view of the matter also, the Income-tax Officer was held to have no jurisdiction to pass the impugned order under section 154 and dismissed the appeal." In this reference, at the instance of the Revenue, we are required to answer the question of law referred to earlier. Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, argued for the Revenue and Sri G. Sarangan argued for the assessee. Sri Srinivasan argued (i) that a person claiming development rebate is required to create development rebate reserve in the year in which it was claimed under section 34(3)(a) of the Act and the assessee admittedly not having created the development rebate reserve for the year in question, was not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns laid down are : (i) the amount specified therein has to be debited to the profit and loss account of the relevant previous year and credited to the reserve account, and (ii) this reserve fund so created has to be used by the assessee in the manner and for the period specified therein. The development rebate under section 33 of the Act is allowed subject to the conditions specified in section 34(3)(a) of the Act being satisfied by the assessee. The expression " shall not be allowed " in section 34(3)(a) of the Act is a clear indication of the intention of the Legislature that the compliance with the conditions specified therein are mandatory and have, therefore, to be fulfilled. In Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512 (SC) relied on behalf of the Revenue, the Supreme Court considered whether the creation of a reserve in compliance with section 17 of the Banking Companies Act is sufficient compliance with the requirement of section 10(2)(vib), proviso (b), of the Indian Income-tax Act, 1922. In that case, the assessee, a banking company, claimed development rebate under proviso (b) to section 10(2)(vib) of the Indian Income-tax Act, 1922, and contended that a trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee by the Central Board of Direct Taxes had been withdrawn while in fact it had not been so withdrawn. The question decided in that case is, therefore, distinguishable and is of no assistance to the assessee. We are, therefore, satisfied that an assessee claiming development rebate under section 33 of the Act, is required to create the development rebate reserve in the relevant year as prescribed under section 34(3)(a) of the Act and the assessee not having complied with or fulfilled one of the conditions prescribed under section 34(3)(a) of the Act is not entitled to the development rebate under section 33 of the Act. Rectification of mistake is provided by section 154 of the Act, which reads: " 154. (1) With a view to rectifying any mistake apparent from the record, an income-tax authority referred to in section 116 may amend any order passed by it under the provisions of this Act. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner. The assessee claimed before the Income-tax Officer development rebate of Rs. 16,751 including development rebate of Rs. 5,740 on dies and tools. The Income-tax Officer disallowed the claim for development rebate in respect of dies and tools and allowed the rest of the claim for development rebate, viz., Rs. 11,0 I 1, by his order made on January 31, 1964. The assessee, to the extent his claim was disallowed, filed an appeal before the Appellate Assistant Commissioner. The assessee was not a person aggrieved by the order of the Income-tax Officer to the extent its claim for development rebate was allowed. The Revenue did not challenge the order of the Income-tax Officer to the extent he allowed Rs. 11,011 as development rebate but accepted the said order. The only question for consideration in the appeal before the Appellate Assistant Commissioner was whether the assessee was entitled to development rebate in respect of dies and tools. The Appellate Assistant Commissioner allowed the appeal, by his order made on June 17, 1964, and held that the assessee was entitled to the development rebate in respect of dies and tools. The assessee was satisfied with that part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on him and such failure was destructive of a basic principle of justice, and writ of mandamus should issue to compel him to carry out the directions of the Appellate Tribunal. This decision is of no assistance to the assessee. Rohtak Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 52 (Delhi). In this case, the Delhi High Court held that though the order of the Appellate Assistant Commissioner was silent in respect of depreciation and development rebate, if the Appellate Assistant Commissioner did not modify or reverse the order of the Income-tax Officer on those two items, it meant that he confirmed the decision of the Income-tax Officer and the operative order thereafter was that of the Appellate Assistant Commissioner and the Income-tax Officer had no jurisdiction to rectify any error apparent on the face of the Income-tax Officer's order under section 154 of the Act. In that case, the assessee has taken a specific ground on the question of depreciation and development rebate in his appeal before the Appellate Assistant Commissioner and though the Appellate Assistant Commissioner did not pass any order in respect thereof, the court held that those two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Co. [1958] 34 ITR 130 (SC), the Income-tax Officer made a composite order granting registration to the firm and also an order of assessment on the basis of registration. The assessee filed an appeal before the Appellate Assistant Commissioner against the composite order. The court held that the order of registration made by the Income-tax Officer did not merge in the appellate order of the Appellate Assistant Commissioner, because the order of registration made by the Income-tax Officer was not the subject-matter of the appeal before the Appellate Assistant Commissioner and did not, therefore, merge with the order in appeal. Whether there is merger of the order of assessment in the appellate order of the Appellate Assistant Commissioner and if there is, to what extent, came up for consideration before the Gujarat High Court in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255. The court held that it depends upon the subject-matter of the appellate order. The order of assessment made by the Income-tax Officer merges in the order of the Appellate Assistant Commissioner, only in so far as it relates to items considered and decided by the Appellate Assistant Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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