LexCOMMISSIONER OF INCOME TAX, DELHI CENTRAL versus MODI SPINNING AND WEAVING MILLS CO. LTD.
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COMMISSIONER OF INCOME TAX, DELHI CENTRAL v. MODI SPINNING AND WEAVING MILLS CO. LTD. OCTOBER 26, 1990 A [MADAN MOHAN PUNCHHI AND S.C. AGRAWAL, JJ.] B Income Tax Act, 1922-Section 10(2)(vib), Proviso (b) and CBDT Circular dated October 14, 1965 Explanations (a), (b) and (c) Allowance of development rebate on plant and machinery--Entitlement to by assessee. In Commissioner of Income Tax, Madras v. Veeraswami Nainar & 0 rs., SS ITR .3S, the Madras High Court took the view that the aevelop- ment rebate reserved shonld be made at the time of making up the Profits and Loss A~count, and this was affirmed by this Court in Indian Overseas Bank's Ltd. v. Commissioner of Income Tax, 77 ITR S12. A distinction "'as drawn between development rebate reserve and other reserves createable under the Companies Act and the Income Tax Ad and it was required to be separately created. Consequent to this decision it was noticed that an important circu- ' lar of the Central. Board of Direct Taxes dated October, 4, 1965 was unwittingly mowed down. This circular gave the Board's Explanation in three paragraphs (a), (b) and (c) regarding the position for creation of statutory reserve for allowance of development rebate. A spate of litigation ensued and·some of the taxing authorities, relying on the Indian Overseas Bank's case in some cases, took revi- sional and rectificatory actions, and these reached various High Court$. The Gujarat High Court in Surat Textiles Mills Ltd. v. Comm~ sioner of Income-tax Gujarat, 80 I. T .R. 1 opted for the narrow view in assuming that all the 3 Explanations contained iii the 1965 Circular stood wiped out by Indian Oversas Bank's case. The Central Board of Direct Taxes, therefore, took the step of withdrawing in the year 1972 the Circular dated Odober 14, 196S to the extent it stooa superseded by decision in Indian Overseas Bank's case. Other High Courts, however, took a broader view to the effect that c D G · Explanation contained in para (a) only was done away with by this Court's decision in Indian Overseas Bank's case and that contained in H paras (b) and (c) were still alive. 461 A B c 462 SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R. On account of the aforesaid difference of opinion, it was represen- ted to the Board that the earlier instructions dated October 14, 1965 represented the correct position of law and that the withdrawal to the extent it was presumed to be overruled by the decision in Indian Over- seas Bank's case had created unnecessary hardships to the assessees. In the instant appelll the question, whether the respondent- assessee was entitled to al1owance rebate on the plant and machinery after 1.1.1958, after due compliance with the provisions of proviso (b) to section 10(2)(vib) of the Income Tax Act, 1922 was answered by the Division Bench of the Allahabad High Court in favour of the assessee and against the Revenue. The Revenue appealed to this Court. Dismissing the appeal, this Court, HELD: 1. The Board itself had clarified the matter by Circular D No. 189 dated 30th January, 1986. It states to have re-examined the issue involved coming to the view that except the clarification contained in Explanation para (a) which stood superseded by the decision of this Court in Indian Overseas Bank's case, the clarification given in para- graphs (b) and ( c) bold good. [ 4650] E 2. The Board itself has opted for the broader view expressed in the matter in the-Tata Iron and Steel Companies' case and other cases. There is, therefore, no reason 'to do the exercise of taking any side of the two views. [465E] .3 •. It is undisputed that the Board's view is not only valid under F the new Income Tax Act of 1961, but to the Indian Income-Tax Act, 1922 as well. [465F] Commissioner of Income Tax, Madras v. Veeraswami Nainarand Ors., 551. T .R. 35, affirmed. G Indian Overseas Bank Ltd. v. Commissioner of Income Tax, 77 I. T .R. 512, followed. Surat Textile Mills Ltd. v. Commissioner of Income-Tax Gujarat, 80 I. T .R. 1, overruled. H Veerabhadra Iron Fo1mdary & Anr. v. Commissioner of Income ' C.l.T. v. MODI SPG. & WVG. MILLS 463 Tax, 69 I.T.R. 425; Tata Iron and Steel Co. Ltd. v. N.C Upadhyaya. 96 A I.T.R. I and The Commissioner of Income Tax v. SardarSingh, 86 ITR 387, approved. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 330 of 1976. From the Judgment and Order dated 13.3. 1972 of the Allahabad High Court in !TR No
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