1. This is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), and the following question of law has been referred :
'Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the development rebate of Rs. 12,319 was wrongly allowed by the Income-tax Officer, and the Income-tax Officer was justified in withdrawing the same ?'
2. The facts of the case, as appear from the statement of the case, are as follows :
The assessee is a private limited company. In the accounting year that is, the financial year 1965-66, the assessee had installed machineries, the cost of which came to Rs. 1,32,010. A development rebate amounting to 20% of the same, that is, Rs. 26,402, was allowed by the Income-tax Officer in the assessment. The reserve created by the assessee was also to the extent of Rs. 26,402. It was created by debiting the profit and loss account. The Income-tax Officer subsequently noticed that the assessee is entitled to a development rebate at the rate of 35% and not 20%. The development rebate at the enhanced percentage would be Rs. 46,203.
3. The Income-tax Officer by his order dated June 24, 1968, allowed the enhanced development rebate but subsequently he found that there was a mistake in the rectification order itself. The assessee had not created adequate reserve of 75% of the development rebate claimed and it was found that on the reserve of Rs. 26,402 created by the assessee a development rebate of only Rs. 33,884 could be allowed. The balance of Rs. 12,319 was treated as wrongly allowed and was withdrawn under Section 154 of the Act.
4. On appeal against the said order of rectification the Appellate Assistant Commissioner found that the assessee by a letter dated January 3, 1970, had informed the Income-tax Officer that the shortfall in the reserve would be made good if the Income-tax Officer permitted it to do so. By another letter dated January 28, 1970, the assessee informed the Income-tax Officer that for the accounting year 1967-68, the development rebate reserve as per the assessee's claim would be Rs. 53,715. Against this amount the assessee had actually created a reserve of Rs. 71,617 and, therefore, the shortfall for the assessment year 1966-67 was made good in the books for 1968-69. The Appellate Assistant Commissioner did not accept that the deficiency was made good in the subsequent year. He observed that the provision for development rebate at 35% was in the statute book from April 1, 1964, and the company should have made sufficient reserve, during that year itself. He also rejected the contention of the company that Section 154 was not applicable.
5. On further appeal before the Income-tax Appellate Tribunal the assessee contended that sufficient reserve was created for the assessment year 1968-69, which would more than compensate the deficiency of the assessment year 1966-67 and, therefore, the order withdrawing the development rebate was not tenable in law. The Tribunal, however, did not accept the said contention holding that as far as the assessment year was concerned adequate reserve was not created and since the required reserve was not created during the accounting year the claim of the assessee could not be upheld. Thus, the Tribunal dismissed the appeal. On the above facts the above question of law has been referred.
6. The finding of the learned Tribunal in the appellate order is that the assessee had not created adequate reserve by debiting its profit and loss account of the relevant previous year. This fact is not disputed. The submission made on behalf of the assessee is that though sufficient reserve was not made in the assessment year 1966-67, the shortfall in the reserve for the assessment year 1966-67 was made good in the Books of account by the reserve made for the assessment) year 1968-69. The learned Tribunal also has found that no reserve for the assessment year 1966-67 was in fact created in the assessment year 1968-69, but only the reserve already created for the purpose of that year, namely, assessment year 1968-69, was sought to be proved as covering the deficiency of the year in question.
7. Clause (iii) to Section 33 of the Income-tax Act, 1961, as amended by Act No. 15 of 1965, provides for the allowance of development rebate at 35% of the actual cost of machinery or plant to the assessee engaged in priority industry. This amendment came into force with effect from 1st April, 1965. So, in the relevant assessment year 1966-67, the development rebate was allowable at 35% of the actual cost. But the development rebate under Section 33 is subject to Section 34 of the Act.
8. Section 34(3)(a) reads as follows :
'(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 utilized by the assessee during a period of eight years next following for the purposes of the business of the undertaking.....'
9. Admittedly, in the instant case seventy-five per cent. of the development rebate to be actually allowed was not debited to the profit and loss account and the reserve fund was not created in the assessment year 1966-67. That being so reading the provisions of Section 33 and Section 34 of the Act it is quite clear that the assessee in the instant case is not entitled to the rebate as claimed for the assessment year 1966-67.
10. The learned counsel for the petitioner has referred to certain decisions of different High Courts in this connection. In our considered opinion, however, when the statute confers a benefit on the assessee only on the fulfilment of certain conditions, and the language is clear and unambiguous, unless the assessee has fulfilled that condition, there is no justification for straining the language of the statute in favour of the assessee for conferring the benefit.
11. From the record it is found that the Income-tax Officer allowed the development rebate at 35% though the required reserve was not made for the relevant assessment year by his order dated February 20, 1968. But when this apparent mistake was discovered he rectified the same by
withdrawing the development rebate of Rs. 12,319 which was wrongly
12. On a consideration of the facts and circumstances of the case, we find
that the learned Tribunal correctly held that the development rebate of Rs. 12,319 was wrongly allowed by the Income-tax Officer and he was justified in withdrawing the same. We accordingly, answer the question of law in the affirmative and against the assessee.
13. The reference is answered accordingly. We make no order as to costs.
Baharul Islam J.
14. I agree.