TMI Blog1979 (7) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... development rebate for the assessment year 1971-72, without fulfilling the condition of creating a reserve due to absence of profit ? The assessee is an individual who owned three fishing boats. One boat had run for 4 1/2 months, another for 2 1/2 months and the third only for a period of 2 months during the course of the accounting year. A net income of Rs. 13,671 was admitted from these boats after deduction of all admissible expenses except depreciation and development rebate. Development rebate was claimed in respect of these three boats. The assessee had not, however, maintained any books of account and there was no question of any creation of reserve for development rebate. The ITO rejected the claim for development rebate on the ground that no accounts had been maintained and no reserve had been created, and so be was not entitled to the benefit of development rebate. The income was computed at Rs. 42,010. The assessee appealed to the AAC. That officer found that the expenses claimed as spent on the construction of the boats could not be verified as many of the vouchers were not made available. He held that none of the requirements for the allowance of development rebate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany in premises used by it as a hotel and such hotel is for the time being approved in this behalf by the Central Government- (a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the first day of April, 1970, and (b) twenty-five per cent. of such cost, where it is installed after the 31st day of March, 1970; (iii) where the machinery or plant is installed after the 31st day of March, 1967, being an asset representing expenditure of a capital nature on scientific research related to the business carried on by the assessee,- (a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent. of such cost, where it is installed after the 31st day of March, 1970 ; (iv) in any other case,- (a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) fifteen per cent. of such cost, where it is installed after the 31st day of March, 1970. (1A)(a) An assessee who, after the 31st day of March, 1964, acquires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 : Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words 'seventy-five', the word 'fifty' has been substituted. Explanation.-For the removal of doubts it is hereby declared that the deduction referred to in section 33 shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account aforesaid exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid) in accordance with the profit and loss account. " Our attention was also called to the provisions of s. 10(2)(vi)(b) of the 1922 Act, which reads as follows : " 10. (2) Such profits or gains shall be computed after making the following allowances, namely :- ....... (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrectness of the rival views and to express our opinion one way or the other on the controversy agitated. But counsel for the assessee brought to our notice that there was a circular issued by the Board of Revenue which had application on this aspect of the case. It is circular No. 189, dated 30th January, 1976, issued by the Central Board of Direct Taxes. The relevant portion of the circular reads as follows : " Reference is invited to Board's Circular F. No. 10/49/65-ITA.I dated 14th October, 1965, which, inter alia, explained the position regarding the creation of statutory reserve for allowance of development rebate as follows : (a) In the case of certain industrial undertakings, particularly those in which there is Government participation either by way of capital, loan or guarantee, and where there are certain obligations by law or agreement about the maintenance of reserve for development purposes, the development rebate reserve may be treated as included in the, said reserve though not specifically created as a development rebate reserve. (b) In a case where the total income computed before allowing the development rebate is a loss, there was no legal obligation to cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. Our attention was called to the recent decisions of this court in Rajarajeswari Weaving Mills' case [1978] 113 ITR 405 (Ker) and the Full Bench decision of this court in I.T.R. No. 56 of 1976 (since report- in CIT v. B. M. Edward, India Sea Foods [1979] 119 ITR 334). These decisions have emphasised the binding character of the circulars and stated that the courts are also bound to take note of the circulars issued by the CBDT or by the CBR. We have little doubt that, in view of the circular to which our attention has been called by counsel for the assessee, the assessee is entitled to the development rebate. Counsel for the revenue objected to our placing reliance on the circular at this stage when it had not been relied upon before any of the authorities below, namely, the ITO, the AAC and the Income-tax Appellate Tribunal. But we are satisfied that the circular constituted nothing more than the amplification of an aspect of the question of law that was being raised and argued before the Tribunal and the questions of law which have been sent up by the Tribunal for the opinion of this court. It answers the elaboration of the term " question of law " made by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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