COMMISSIONER OF INCOME TAX Vs. ARUNA SIZING MILLS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following questions at the instance of the Commissioner of Income-tax :

(2.) THE assessee is a firm assessed for the assessment year 1969-70. THE relevant previous year ended on 4th September, 1968. Among the machinery used by the assessee, there was a sizing machine the written down value of which was Rs. 40,526 at the beginning of the year. This machine was sold during the year for a sum of Rs. 29,500 resulting in a loss of Rs. 11,026, if the written down value is the criterion. THE book value of the machinery was Rs. 39,495. THE machinery account was credited with the sale proceeds. THE difference between the book value and the realised price was Rs. 9,995. Neither in the balance-sheet nor in the profit and loss account, the loss of Rs. 9,995 was shown. It was, however, shown as a loss on the first day of the next year, namely, on the 5th September, 1968.

(3.) IT is necessary to examine whether the proviso imposed a condition precedent, as contended by the learned counsel for the Commissioner. In Section 34, for instance, in respect of development rebate or depreciation, the conditions for such allowance are set out. IT is provided in Sub-section (3)(a) of Section 34 of the Act that the deduction referred to in Section 33 (development rebate) 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 in the manner provided in the provision. Similarly, in Section 36(2). there is a provision for the allowance of a bad debt. Section 36(2) provides :