Report No. 12

33. Development rebate.-

In respect of a new ship acquired or new machinery or plant installed after the 31st day of March, 1954, which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate, equivalent to,-

(i) in the case of a ship acquired after the 31st day of December, 1957, forty per cent, of the actual cost, of the ship to the assessee, and

(ii) in the case of a ship acquired before the 1st day of January, 1958, and in the case of any machinery or plant, twenty-five per cent. of the actual cost of the ship or machinery or plant to the assessee shall, subject to the provisions of section 34 [section re : conditions for depreciation], be allowed as a deduction in respect of the previous year in which the ship was acquired or the machinery on plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then in respect of that previous year.

Explanation 1.-In the case of a ship acquired or machinery or plant installed after the 31st day of December, 1957, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed (the total income for this purpose being computed without making any allowance under this section) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under this section,-

(i) the sum to be allowed by way of development rebate for that assessment year under this section shall be only such amount as is sufficient to reduce the said total income to nil; and

(ii) the amount of the development rebate, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however that no portion of the development rebate shall be carried forward for more than eight assessment years immediately succeeding the assessment year for which the development rebate was first allowable.

Explanation 2.-Where for any assessment year development rebate is to be allowed in accordance with the provisions of Explanation 1, in respect of ships acquired or machinery or plant installed in more than one previous year, and the total income of the assessee assessable for the assessment year relevant to that previous year (the total income for this purpose being computed without making any allowance under this section) is less than the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely:-

(i) the allowance under paragraph (ii) of Explanation 1 shall be made before any allowance under paragraph (i) of that Explanation is made; and

(ii) where an allowance has to be made under paragraph (ii) of Explanation 1 in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year.

[Section 10(2)(vib), main para.]