TaxTMI 
TaxTMI 
1979 (10) TMI 51
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....ree relevant assessment years the assessee had created development rebate reserve in excess of what had to be statutorily created. In the three original assessments such excess had been included in the computation of capital under the Second Schedule to the Companies (Profits) Surtax Act, 1964. Later on, the ITO being of the opinion that on account of the inclusion of the excess development rebate reserve in the capital chargeable profits had escaped assessment, reopened these assessments. After hearing the objections of the assessee, the three assessments were remade on March 23, 1974, after excluding from the amount of capital such excess development rebate reserve. On appeal by the assessee, the AAC held that the excess development re....
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....ored the assessments of the ITO. At the instance of the assessee, the following question of law has been referred, viz. : " Whether the circular (No. 53-F. No. 7/2/68--TPL dated 11th January, 1971) issued by the Central Board of Direct Taxes and in which circular the extent of its application is not specified is applicable to reassessments in respect of assessment years .1965-66, 1966-67 and 1967-68, even though such reassessments were made only after the aforesaid date of January 11, 1971 ? " A Division Bench of this court in Travancore Rayon's case (ITR No. 110 and 131 of 1971), stated : " Development rebate under section 33 of the Income-tax Act being a deduction allowed in computing the income of the company for the purpose of ....
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....-67, and on February 14, 1968, for 1967-68. Development reserve to the extent of about rupees two lakhs twenty-thousand was allowed under s. 8 of the Act. Notice of reassessment was issued and reassessment was ordered on March 22,1974, changing the two lakhs twenty-thousand of development rebate to one lakh fifty-five thousand odd. Meanwhile, a circular had been issued on January 11,1971, by the CBDT to which we made reference earlier. It was withdrawn on September 9, 1974. It was thus in force on the date of reassessment. The circular, in brief, stated that excess development reserve is includible in the capital. The legal effect of such circulars fell to be examined recently by a Full Bench of this court in CIT v. Edward [1979] 119 ITR 33....
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....d with a return filed under s. 139(1) or the issue of a notice under s. 139(2) ; and that the assessment under this section must be made as if it were made in the relevant assessment year--vide Lakshminarain Bhadani v. CIT [1951] 20 ITR 594 (SC). It is further observed that the assessment must be based on the provisions of the Act as it stood in the year in which the income ought to have been assessed vide Krishna Hydraulic Press Ltd. v. CIT [1943] 11 ITR 504 (Cal) and Maneklal Chunilal & Sons Ltd. v. CIT [1953] 24 ITR 375, 385-6 (Bom). The tax should be charged at the rate it would have been charged had the income not escaped assessment. In view of the principle noticed above, and bearing in mind the relevant dates of assessment, namely, F....
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....oner had also installed some rolling mill rolls. During these four years the petitioner had not created development reserve after taking into consideration the rolling mills installed by it and it had not claimed any rebate in respect of the same. The petitioner's explanation was that the I.T. authorities did not include the rolling mill rolls in the expression " plant and machinery ". The CBDT on November 16, 1968, issued a circular and directed all the ITOs to allow rebate on the cost of the rolling mills. There was also a circular dated November 21,1958, by the CBR regarding the allowance of development rebate to tea companies--admitted to be of general application. That circular stated that where there is no deliberate contravention of ....