R VENKATASUBRAMANIAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred under section 256(1) of the Income-tax Act, 1961, for decision "Whether, on the facts and in the circumstances of the case, the assessee was entitled to development rebate on the four new buses put on road after December 31, 1957 ?" *THE assessee is a registered firm engaged in various businesses including the running of bus service. During the accounting year ended March 31, 1958, it had purchased seven new buses, of which four were put on the road after December 31, 1957. In respect of the bus service business it filed a return on February 26, 1959, in which depreciation totalling Rs. 2, 00, 252 was claimed by the assessee. This included development rebate on seven new buses.

(2.) THE total development rebate in respect of the seven new buses claimed was Rs. 62, 216, out of which a sum of Rs. 35, 727 related to the development rebate on the four new buses put on the road after December 31, 1957. THE Income-tax Officer rejected the claim of the assessee for development rebate in respect of the seven buses purchased during the year of account on the ground that buses cannot be "installed" within the meaning of section 10(2)(vib) of the Indian Income-tax Act, 1922, which is a condition precedent for allowing such a claim. THE assessment was completed on March 20, 1959. THE assessee filed an appeal to the Appellate Assistant CommissionerOne of the points appealed against was the rejection of the claim for deduction of development rebate amounting to Rs. 62, 216. In the course of the appeal proceedings, the assessee filed a revised income and expenditure account for the year ending March 31, 1958, as also a balance-sheet as on March 31, 1958. In the income and expenditure account a sum of Rs. 62, 216 was debited as development rebate reserve on buses. Correspondingly in the balance-sheet there was an account called "development rebate reserve" to which this amount had been credited. In the view that necessary debiting of the development rebate to the profit and loss account and crediting the development rebate reserve having been made before the disposal of the appeal, the conditions required under section 10(2)(vib) have been complied with, the Appellate Assistant Commissioner held that the assessee was entitled to claim development rebate reserve even at the appeal stage. He was of the view that the assessee could not be denied the allowances on the ground that the entries had been made after the completion of the assessment. THE department filed an appeal before the Tribunal.