Carry forward of unabsorbed rebate reduction was not permitted, so the 1959-60 rebate withdrawal failed.

The relevant Finance Acts did not permit carry forward of an unabsorbed reduction of rebate from an earlier year beyond the immediately preceding year contemplated by the statute. Applying the Supreme Court's construction of the proviso to Paragraph D of Part II of Schedule I to the Finance Act, 1959, the Court held that the revenue could not withdraw rebate for the assessment year 1959-60 by setting off the earlier shortfall. The question was answered in favour of the assessee, and the rebate reduction was held impermissible on the facts found.

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Issues: Whether the unabsorbed reduction of rebate arising in an earlier assessment year could be withdrawn and given effect to in the assessment year 1959-60 under the relevant Finance Acts.

Analysis: The reference turned on the construction of the second proviso to Paragraph D of Part II of Schedule I to the Finance Act, 1959, read with the earlier Finance Acts. The Court followed the Supreme Court's interpretation that the provision did not authorise carry forward of unabsorbed reduction of rebate from years earlier than the immediately preceding year contemplated by the statute. On that construction, the revenue could not reduce the rebate for the assessment year 1959-60 by carrying forward the earlier shortfall.

Conclusion: The question was answered in the negative and in favour of the assessee.

Final Conclusion: The withdrawal of rebate for the assessment year 1959-60 was not permissible on the facts found, and the reference succeeded for the assessee.

Ratio Decidendi: An unabsorbed reduction of rebate cannot be carried forward and set off in a later assessment year unless the governing provision expressly permits such carry forward.

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