Development rebate reserve entries made after year-end were valid where completed before assessment finalisation.

The proviso to section 10(2)(vib) of the Indian Income-tax Act, 1922 required a debit of 75% of the development rebate to the profit and loss account and a credit to a reserve account, but it did not expressly require those entries to be made before the accounting year closed. As the reserve could be created when the profit and loss account was drawn up and the assessee made the entries before the assessment was finalised, the statutory condition was treated as satisfied and development rebate was allowable.

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Issues: Whether the assessee was entitled to development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922 when the reserve-account entries were made after the close of the accounting year but before the assessment was completed.

Analysis: The statutory proviso required that an amount equal to seventy-five per cent of the development rebate be debited to the profit and loss account and credited to a reserve account, but it did not expressly specify that the entries had to be made before the close of the accounting year. The reserve arises only when the profit and loss account is drawn up and profits are ascertained, and that account is not a primary day-to-day book but an abstract of the results of the business. Since the assessee had made the required entries before the Income-tax Officer finalized the assessment, the statutory condition was treated as satisfied.

Conclusion: The assessee was entitled to the development rebate.

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