1979 (10) TMI 69

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....ith the order of the ITO was that no development rebate reserve had been created in the year in which the new machinery was installed. It is contended for the assessee that this view of the Commissioner is erroneous and opposed to the circulars issued by the department. The income computed for the assessment year 1968-69, was a loss before any allowance of development rebate. As there was no positive profit the assessee was unable and did not create a reserve. It transpires that for certain subsequent assessment years also development rebate allowable was computed, but was not actually allowed as there was no sufficient profit out of which it could be set off. Only in the assessment year 1973-74, there was sufficient profit out of which ....

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....f the Act, inter alia, provides that the sum to be allowed by way of development rebate for a particular assessment year shall be only such amount as is sufficient to reduce the said total income to nil and further makes provision for the unabsorbed development rebate computed in accordance with the provisions of law to be carried forward up to eight years. The condition required for the actual allowance of the development rebate by creation of a specific reserve in that behalf as provided under s. 34(3) does not control the carry forward of the development rebate computed in the earlier years and does not provide that if in the year when new machinery is installed such a reserve is not created, the development rebate allowable shall not be....

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....issued in the year 1972. In these circumstances, the Board issued a further circular No. 189 dated 30th January, 1976, clarifying the position. (This circular is to be found in [1976] 102 ITR 90 (St)). The said circular noticed the decisions of the High Court of Bombay in Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO [1973] 92 ITR 241 and Tata Iron Steel Co. Ltd. v. N. C. Upadhyaya [1974] 96 ITR 1, and reviewed the position and stated as follows (at p. 91 para 5): " The Board have re-examined the issues involved and are of the view that except the clarification given in part (a) of para. 1 above, which stands superseded by the aforesaid decision of the Supreme Court, the clarifications given in parts (b) and (c) of para- 1 above hol....