UTKAL MACHINERY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under S. 256(1) of the IT Act, 1961, at the instance of the assessee, the following question of law has been referred to this Court by the Tribunal, Cuttack Bench:

(2.) THE assessee is a subsidiary of a public limited company carrying on the business of manufacture and supply of heavy machineries. In the asst. year 1976 77, it claimed that the development rebate is to be deducted in preference to the unabsorbed depreciation. The claim of the assessee was turned down at all stages. The unabsorbed depreciation being adjusted, there was no balance left for adjustment of the unabsorbed development rebate. Aggrieved by the rejection of its claim, the assessee moved under S. 256(1) of the IT Act for a reference and on consideration of the said application, reference has been made by the Tribunal for the opinion of this Court.

(3.) MR . A. K. Ray, learned counsel for the assessee, submitted that the carrying forward of the unadjusted depreciation is for unlimited period whereas the carrying forward of development rebate is only for eight years. Accordingly, the benefit given under the Act should be given effect in a manner by which the assessee gets full benefit. He relied upon a decision of the Supreme Court in CIT vs. J. H. Gotla (1985) 156 ITR 323 (SC), where it has been held that the plain literal interpretation of a statutory provision which produces a manifestly unjust result is to be avoided. The Supreme Court observed (at page 339):