TMI Blog1984 (2) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was referred, is a private limited company. It derived income from manufacture and sale of polyester and resins which are used in the manufacture of paints. The accounting year relevant to the assessment year 1972-73 ended on June 30, 1971. The assessee-company had, during the " previous year " relevant to the assessment year 1971-72, installed and put to use new machinery worth Rs. 1,65,521 entitling it, in terms of section 33(1)(a) of the I.T. Act, 1961, to a development rebate of Rs. 33,904 at the rate of 20 per cent. During the same "previous year", the assessee company had installed and put to use additional new machinery worth Rs. 20,042 in respect of which it was entitled to a development rebate of Rs. 3,006 at the rate of 15 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment rebate deserved rejection. It is, therefore, that the question of law, as posed at the outset, is said to have arisen. Allowance of development rebate under the I.T. Act under ss. 33(1)(a) and 33(2) read with s. 34(3)(a) and the Explanation appended thereto, has been a precedent-embroiled question. We would have gone on to steer the way but it has been brought to our notice that the Central Board of Direct Taxes has, in Circular No. 189 dated January 30, 1976, published in [1976] 102 ITR 90 (Statutes Section), clarified the matter and put to rest the controversy. Pithily put, the matter has been summarized to mean that in case, where the total income had been computed before allowing the development rebate, there is a loss, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as no development rebate is actually to be allowed in that year. Even way back in 1969 in Radhika Mills Ltd. v. CIT [1969] 74 ITR 661, the Madras High Court, while interpreting the analogous provisions under the Indian I.T. Act, 1922, observed as follows (p. 667): " We cannot overlook the word 'utilised' in clause (b) of the proviso and the expectation that the reserve contemplated by this provision could be utilised for the purpose of the business but not for the prohibited purposes. That shows clearly that debiting in the profit and loss account and crediting in the reserve account is not theoretical but on the basis of actual reserve created. One other question that may arise is whether the requirement to credit a reserve account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court's case of Indian Overseas Bank Ltd. [1970] 77 ITR 512, as also Barar Lion Buttons (P.) Ltd. v. CIT [1973] 87 ITR 44 (P H) and Leader Engineering Works v. CIT [1980] 124 ITR 44 (P H) (the latter two decisions are of this court), on the same premises holding that for getting such a benefit, a separate rebate reserve has to be created by the assessee, cannot stand on the anvil of the clarificatory circular order of January 30, 1976. Undoubtedly, such circulars are binding on the Revenue as held by the Supreme Court in Navnit Lal C.Javeri v. K. K. Sen, AAC of I.T. [1965] 56 ITR 198. It cannot get out of it and the decision in this case must necessarily go against it. For the aforesaid view, the question posed at the outset is ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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