Commissioner of Income Tax vs Shobhana Silk Mills

T.D. Sugla J.

In this departmental reference relating to the assessee''s assessment for the assessment years 1965-66, 1966-67 and 1968-69, the Tribunal has referred to this court the following questions of law u/s 256(2) of the Income Tax Act, 1961 :

"1. Whether, on the facts and the circumstances of the case, the Tribunal was justified in coming to the conclusion that the division of the development rebate reserve amongst the partners on the dissolution of the firm did not amount to the utilisation thereof for a purpose which was not the purpose of the business of the undertaking within the meaning of section 155(5)(ii)(c) of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Tribunal ought to have deemed the development rebate allowed as wrongly allowed and direct the computation of the total income of the assessee for the relevant previous year with the necessary amendment as contemplated u/s 155(5) of the Income Tax Act, 1961 ?"

Counsel are agreed that, in view of the Supreme Court judgment in the case of Malabar Fisheries Co. Vs. Commissioner of Income Tax, Kerala, , the first question is to be answered in the affirmative and in favour of the assessee. Counsel are also agreed that the second question is consequential and required to be answered in the negative and in favour of the assessee. The questions are so answered.

No order as to costs.