COMMISSIONER OF INCOME TAX Vs. HEMANTPAT SINGHANIA HUF

JUDGEMENT

(1.) Under Section 256(2) of the Income-tax Act, 1961, the Tribunal has stated the following question :

(2.) The assessee is a Hindu undivided family. The assessment year concerned is 1967-68. For this assessment year, the assessee claimed development rebate of Rs. 42,178. He created a development rebate reserve as required by Section 33 read with Section 34(3)(a) of the Act. The development rebate was, accordingly, allowed. However, in the course of the assessment proceedings for the assessment year 1972-73, the Income-tax Officer found that the development rebate reserve of Rs. 42,178 created during the previous year relevant to the assessment year 1967-68 has been transferred to the capital account within a period of eight years from the creation of such reserve. The Income-tax Officer was of the opinion that such transfer amounts to violation of the condition prescribed in Section 34(3)(a) and, accordingly, he rectified the assessment for the assessment year 1967-68 by passing an order under Section 154 of the Income-tax Act. The appeal preferred by the assessee was dismissed by the Appellate Assistant Commissioner whereupon the assessee went to the Tribunal by way of further appeal. The Tribunal held that the transfer of development rebate reserve to capital account does not amount to violation of any of the conditions prescribed in Section 34(3)(a) and, therefore, the Income-tax Officer was wrong in rectifying the assessment for the year 1967-68. Thereupon, the Revenue has applied for and obtained this reference.

(3.) Clause (a) of Sub-section (3) of Section 34 reads as follows :