TaxTMI 
TaxTMI 
1982 (4) TMI 58
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....n should be made in the accounts for the year ending 31st March, 1964, itself. The auditor thereafter advised that it was not necessary to draw up a fresh balance-sheet to implement this and the necessary appropriation and adjustment could be indicated in the balance-sheet for the year ending 31st March, 1965. Accordingly, in the accounts for the year ending 31st March, 1965, the opening balance for the development rebate reserve is shown as modified and a note to that effect is recorded by the auditor. Despite this, the ITO did not consider the assessee's claim of Rs. 28,100 for development rebate. The assessee being aggreived, appealed to the AAC who by his order dated 11th April, 1969, confirmed the disallowance. On further appeal to the Income-tax Appellate Tribunal, the assessee produced the balance-sheet for the relevant period along with the auditor's report and a copy of the ledger account wherein a provision for the development rebate had been made. The directors' report in respect of the succeeding financial year in which it was specifically stated that the provision for development rebate had been made " in the account of the previous year itself " was also shown. On t....
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....to different situations. The Revenue, being dissatisfied with the decision, moved for a reference. As a result, the following question of law has been referred for our opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the assessee was entitled to development rebate under the provisions of section 34(3)(a) of the Incometax Act, 1961 ? " Mr. G.C. Lalwani, appearing for the Commissioner of Income-tax, contended that the development rebate deduction could not be allowed unless the amount had been debited to the profit and loss account and credited to a reserve account before the accounts were closed. In order to appreciate the point in issue it is necessary to set out the relevant provisions. Section 34(3)(a) of the Act reads: "(3)(a) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the ....
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....[1965] 55 ITR 35 (Mad) and of the Supreme Court in Indian Overseas Bank Ltd. [1970] 77 ITR 512. At p. 222 (of 91 ITR) Ramaswami J., speaking for the court, has observed, " A reading of this provision makes it clear that the debiting of the profit and loss account and crediting of the development rebate reserve account should be at the time when the profit and loss account is made or finalised. It may be that the assessee could amend or correct his accounts before he submits the return to the Income-tax Officer but that is not to say that the assessee could readjust the accounts for the purpose of claim ing development rebate at any time he chooses. Section 10(2)(vib) being concession or an exemption, subject to the fulfilment of the conditions under the proviso, the conditions will have to be strictly complied with before the benefit under that section could be claimed. " I However, there is a catena of cases taking a more liberal view and permit the reserve to be created so long as there are proceedings pending before the ITO, for example, even after filing a return but while filing a revised return: CIT v. Narula Cold Storage & Ice Factory [1976] 104 ITR 148 (Orissa); before co....
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....that period at the annual general meeting. The balance-sheet is a formal arrangement of facts and figures in an intelligible manner indicating therein the total value of assets and liabilities on particular date. Its function is to endeavour " to show the share capital, reserves (distinguishing those which are available for distribution as dividends from those not regarded as so available) and liabilities of the company at the date at which it is prepared, and the manner in which the total monies representing them are distributed over the several types of assets ". The responsibility for preparing the annual accounts and the balancesheet and laying it before the annual general meeting is placed on the directors, the members of the company not being in a position to personally direct the business. The balance-sheet and profit and loss account have to be approved and authenticated in terms of s. 215 by the directors and submitted to the auditor. The auditor is the representative of the shareholders and owes no duty to the management. If any confidential or other report is made by him to the management it must be attached to the balance-sheet. The report of the board of directors is ....