TMI Blog1978 (3) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... " The facts found and/or admitted in these proceedings are that in the original assessments of Indian Iron Steel Co. Ltd., Calcutta, the assessee, development rebates of various amounts were allowed. Subsequently, it was pointed out by the revenue audit that the rebate allowed was irregular and, therefore, should be withdrawn by rectification of the assessments. Thereupon, the Income-tax Officer issued a notice under section 154/155 of the Income-tax Act, 1961, requiring the assessee to show cause why the alleged mistakes should not be rectified. It was alleged that the statutory reserve which the assessee had to maintain under section 34(3) of the Income-tax Act, 1961, was not maintained and further that amounts out of the said statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilised for this purpose, the reserve itself must be held to have been so utilised. In the instant case, when the loans were repaid, the development rebate reserve was accordingly utilised to that extent and the assessee-company was entirely justified in wiping out the reserve fund accordingly. Under these circumstances, the insistance by the Income-tax Officer that the reserve fund should have been kept intact is like asking the assessee-company to eat a cake and to keep it also. I entirely agree with Shri Mitra that the Act nowhere specifies that the reserve must be held intact for 8 years. This requirement is entirely a figment of imagination on the part of the Income-tax Officer and fails to take into account not only the words used in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly allowed in the original assessment or not and dismissed the appeals of the revenue. Mr. B. L. Pal, learned counsel for the revenue has contended before us that in view of the report of the revenue audit, which was a part of the record, there was a mistake apparent in the record and it could be rectified by initiating proceedings under section 154. In support of the contentions Mr. Pal cited Indra Singh Sons P. Ltd. v. Union of India [1967] 64 ITR 501 (Cal) for the proposition that an Income-tax Officer could proceed under section 35 of the Indian Income-tax Act, 1922, even though he had jurisdiction to proceed under section 34 of the Act in the same facts and circumstances. Mr. Pal contended that in the instant case the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, has drawn our attention to a decision of this court in the case of the same assessee (Income-tax Reference No. 29 of 1970--Commissioner of Income-tax v. Indian Iron Steel Co. Ltd. [1978] 111 ITR 843) where this court on facts identical to those before us held that in the assessment years 1961-62 and 1962-63 the amounts which were transferred from the reserve account of the assessee for the purpose of repayment of loans obtained from the Government of India and the World Bank were not prohibited by section 155 of the Income-tax Act, 1961, and on that ground development rebate granted could not be withdrawn. In those years it had been alleged by the revenue that the amounts withdrawn from the development reserve had been utilised for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to in section 33 shall not be allowed unless an amount equal to seventy-five 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-- (i) for distribution by way of dividends or profits; or (ii) for remittance outside India as profits or for the creation of any asset outside India ..........." "155. (5) Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship, machinery or plant installed after the 31st day of December, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the sale or transfer took place or the money was so utilised." It is not in dispute here that a development reserve was created. It is also not in dispute that amounts have been spent from this reserve for the purpose of repayment of business loans of the assessee. On the aforesaid facts, it cannot be held that there has been any violation of section 155. This is also the view taken in Income-tax Reference No. 29 of 1970 [Commissioner of Income-tax v. Indian Iron Steel Co. [1978] 111 ITR 843 (Cal)] noted earlier. The only question that remains is whether section 154 could have been applied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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