Commissioner of Income Tax vs Kelvin Jute Co. Ltd.

Ajit K. Sengupta, J.—This is a reference u/s 256(1) of the Income Tax Act, 1961, for the assessment-year 1969-70. For the said assessment year, the assessee claimed development rebate of Rs. 2,75,536. The Income Tax Officer disallowed the assessee''s claim as no development rebate reserve had been created. When the matter came up in appeal before the Appellate Assistant Commissioner, it was submitted before him that as there was nil income assessed, no development rebate reserve could be created and the Income Tax Officer should have computed the develop-ment rebate to be carried forward to be set off against the profits of the future years on the creation of suitable development rebate reserve. The Appellate Assistant Commissioner held that as there was a commercial profit in the year under consideration, the assessee should have created development rebate reserve and as that was not done, the assessee was not entitled to the development rebate. He thus confirmed the action of the Income Tax Officer. The assessee appealed to the Tribunal. The Tribunal considered the respective contentions of the parties and observed that it had been held by the Calcutta High Court in the case of West Laikdihi Coal Co. Ltd. Vs. Commissioner of Income Tax, , that an assessee was not obliged to create a reserve fund in any year if it had no taxable income in that year for the purpose of carrying forward the development rebate in the following years. The Tribunal held that although the books may show profits, if the assessment results in nil income or loss, there will then be no obligation on the part of the assessee to create a reserve as a condition for carrying over the development rebate. The Tribunal accordingly held that the assessee was entitled to development rebate to be carried over to the following years and directed the Income Tax Officer to do so. On the aforesaid facts the following questions of law have been referred to this court:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the development rebate even though it was not obliged to create development rebate reserve in the assessment year 1969-70 as the income assessed was nil?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to have the development rebate carried over to the following year ?"

It is not disputed that on the facts found by the Tribunal, the questions in this reference are concluded by the decision of this court in the case of West Laikdihi Coal Co. Ltd. Vs. Commissioner of Income Tax, . Following the said decision, we answer the first question in the affirmative and in favour of the assessee. In view of the answer to the first question in the affirmative, the second question is also answered in the affirmative and in favour of the assessee. We may note here that the Central Board of Direct Taxes by a Circular No. 189 dated January 30, 1976, vide [1976] 102 ITR 90, accepted the position as laid down in the aforesaid judgment of this court.

There will be no order as to costs.