S.S. Chadha, J.
1. This reference under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), at the instance of the Department, raises the following question for the opinion of the court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the assessed was entitled to claim development rebate for the assessment year 1956-66 without creating development rebate reserve ?'
2. The facts giving rise to this reference are these. M/s. Durga Enterprises Pvt. Ltd., the assessed is a company which manufactures insulwool, glass-wool and refractories. For the assessment year 1665-66 (accounting year ended October 31, 1964), it had claimed development rebate in respect of certain assets installed in the relevant accounting year. The ITO rejected the claim on the ground that no development rebate reserve had been created, that the assessed had filed a return declaring a loss of Rs. 2,04,404 for the relevant assessment year and the ITO assessed it on a total income of Rs. 44,562. The assessed went in appeal to the AAC contesting, inter alia, the ITO's refusal to allow development rebate for the assessment year 1965-66. The AAC upheld the ITO's action on the ground that no provision had been made in the profit and loss account for development rebate. The AAC allowed relief on several other counts thereby reducing the total income by about Rs. 1,78,000 and directing further relief to be given on recomputation of the depreciation.
3. The assessed filed further appeal before the Income-tax Appellate Tribunal (for short called 'the Tribunal'). The Tribunal held that for the actual allowance of development rebate, the creation of a development rebate reserve is a must but not for claiming the rebate; that in the instant case, the assessed suffered a loss in the accounting year ended on October 31, 1961, and it was, thereforee, not possible for it create a development rebate reserve by debiting in the accounts of that year : that for this shortcoming, the assessed can be rightly denied the development rebate in its assessment for the assessment year 1965-66, and that, however, if the necessary reserve relating to the claim is created in the subsequent assessment year, in which the assessed-company earns income and the period for which the development rebate reserve can be legally carried forward had not expired, there is no reason why the claim cannot be allowed under s. 33(2)(ii). With this observation, the Tribunal held that lower authorities were not justify in ignoring the assessed's claim of development rebate. Accordingly, the Tribunal aside their order in so far as it related to a consideration of this claim and restored the matter to the ITO. The ITO was called upon to consider the assessed's claim on merit and quantify the development rebate, if any which was to be carried forward for the purpose of being adjusted in a year in which the company earns profit and also creates the necessary reserves.
4. For the reasons recorded in ITR 195 of 1975 [CIT v. Metal Forging (P.) Ltd. - : 149ITR259(Delhi) ], we answer the reference against the Department with no order as to costs.