VEERABHADRA IRON FOUNDRY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 66(1) of the Indian IT Act of 1922 by the Tribunal framing the following question for our decision :

(2.) THE assessee is a registered firm carrying on business in the manufacture and sale of sugarcane crushers., tobacco furnaces, etc. During the year of account ending March 31, 1960, relevant to the asst. year 1960 61, the assessee also started the business of exhibiting cinema films on December 4, 1959, when he installed new machinery costing about Rs. 1,00,233. In the return submitted by the assessee a claim was made towards development rebate on the value of this machinery basing the claim under the provisions of S. 10(2)(vib) of the IT Act of 1922. The assessee had not credited to a reserve fund as required by the provisions of the Act and did not make the relevant entries in respect of the reserve fund before the close of the accounting year. It is stated by the assessee that this omission was due to a misapprehension on the part of the assessee that such entries should be made only by companies. During the assessment proceedings this omission was pointed out by the ITO and, on the request of the assessee, the proceedings were adjourned for a few days, so as to enable the assessee to make the relevant entries. Accordingly, the assessee made the relevant entries on August 9, 1961, debiting the profit and loss account relating to the accounting year with a sum of Rs. 18,784 and crediting the development rebate reserve account likewise and the assessee made the consequential entries in the accounts of the two partners. On the basis of these entries, the assessee made the claim towards development rebate. It may be recalled that though the entries were not made initially, the assessee in fact did make a claim towards development rebate. But though the ITO himself pointed out the mistake and was even inclined to grant sufficient time to the assessee for making the entries, nevertheless, he disallowed the claim on the ground that the assessee ought not to have made the relevant entries nearly one year and four months after the closing of the accounting year and the statutory requirement was not complied with by the assessee. The AAC agreed with the conclusion of the ITO and dismissed the appeal. On appeal by the assessee before the Tribunal, the same view was taken and the appeal was accordingly dismissed. Thereafter, the assessee applied to the Tribunal for a reference under S. 66(1) of the Act and accordingly the Tribunal referred the above question for our decision.

(3.) THE assessee's claim for development rebate was disallowed on the ground that the mandatory provisions of proviso (b) had not been complied with. The first part of the proviso (b) refers to certain exceptions and the present case does not fall within those exceptions because the machinery was installed after January 1, 1958. Hence, omitting exceptions to the proviso, it reads as follows :