Judgment :- 1. At the instance of the Revenue, the Income tax Appellate Tribunal, Cochin Bench, has referred the following question of law for our determination: "Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the Income-tax Officer is not justified in withdrawing the development rebate granted to the assessee?" The assessee, M/s. Malayalam Plantations Ltd., Cochin, is a Limited Company, owning a number of estates in Kerala. The Company is registered in London and the shareholders and the Board of Directors are in London. That is why it is known as the sterling company. As it was receiving income from plantations and from other activities in India, it is assessable in India as well, in respect of such profits. The assessment years relevant for the purposes of these references are 1965-66 and 1966-67. The Company had installed machineries in the course of the accounting years relevant to the assessment years 1958-59 to 1966-67. On these materials, it claimed development rebate. The eligibility of the claim is governed by S.34 (3) of the Income-tax Act, which reads thus: "34. Conditions for depreciation allowance and development rebate. (3) (a) The deduction referred to in S.33 shall not be allowed unless an amount equal to seventy-five percent 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 utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than (i) for distribution by way of dividends or profits; or (ii) for remittance outside India as profits or for the creation of any asset outside India: Provided that this clause shall not apply where the assessee is a company, being a licencee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the Ist day of January, 1958: Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words "seventy-five", the word "fifty" has been substituted. Explanation. Explanation. For the removal of doubts, it is hereby declared that the deduction referred to in S.33 shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account aforesaid exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid) in accordance with the profit and loss account. xx xx xx xx" The Section insists on the assessee creating a development rebate reserve equal to 75 percent of the development rebate to be actually allowed, by debiting to the Profit & Loss Account of the relevant accounting year and crediting to a reserve account to be utilised by the assessee during a period of eight years next following for the purpose of the business other than for distribution of dividends or for remittance outside India. It is enough to notice at this stage that utilisation of the reserve for the prohibited purposes of distribution of dividends or remittance outside India disqualify the assessee from the benefit of the development rebate. The assessee in this case had income from cultivation and manufacture of tea. That income was partly agricultural and partly non-agricultural. R.8 of the Income-tax Rules, 1962, had application to the case. Under that R.40% of the income derived from the sale of tea grown and manufactured by a seller in India is to be deemed to be liable to income-tax. 2. The statement of the case has given the following table which shows the reserves created under S.34 (3), the development-rebate available without applying the provisions of R.8, 75% of such development rebate, and 75% of the development rebate after applying the provisions of R.B. The said table is as follows: Table:1 From the table it will be seen that the total reserves actually created in the books from the assessment year 1959-60 to the assessment year 1966-67 is 87.100/- sterling. The total reserves from 1958-59 to 1966-67 was £87,750/-. For the assessment year 1965-66, the Income-tax Officer had allowed the development rebate of £24,245 (before applying R.8). The assessee should create 75% of the development rebate, that is, only £18,184/ . It only created a development reserve of £18,200/ . The balance sheet for the year had added this amount to the development rebate reserve already shown for the earlier year. 3. The assessee should create 75% of the development rebate, that is, only £18,184/ . It only created a development reserve of £18,200/ . The balance sheet for the year had added this amount to the development rebate reserve already shown for the earlier year. 3. For the assessment year 1966 67, the development rebate allowed was £ 22,46b/ . The assessee had created a reserve of £ 17,000. The Tribunal commented that these figures would establish that the development rebate reserve created by the Company was on the high side of 75% required under the statute. This is after proceeding on the assumption that 100% of the income is taxable and R.8 does not apply. But the assessee being a Tea Company and only 40% of the income from the business being taxable to Central Income-tax the development reserve need be only 75% of the taxable income, i. e. 75% of 40%. As the assessee had created reserves on 10% of the income, it was the Tribunal's view that there was no deficiency in respect of development reserves. 4. The Income-tax Officer withdrew the development rebate allowed to the assessee for 1966-67. For 1965-66 he substituted a development rebate of only Rs. 78,221/-as against Rs. 2 lakhs and odd originally allowed. On appeal to the Appellate Assistant Commissioner that Officer found that it had not been established that the development rebate had been utilised for distribution of dividends which was prohibited under S.34 (3) of the Act. He also found that the assessee had created development rebate for all the years from 1959-60 to 1966-67 very much in excess of what is actually required. It was his finding that the development rebate reserve was more than what was required by the terms of the Section. 5. The Department appealed to the Tribunal. Agreeing with the Appellate Assistant Commissioner, the Tribunal found that the reserve required for all these years was only £ 45, 222, whereas there, was in existence reserve even after appropriation, of 55,064 pounds. The contention of the Department that the excess of the earlier year was not available for the subsequent year was found to be against facts. The Tribunal also adverted to the columns in Para.3 and found that in every year there was an excess of development reserve. The contention of the Department that the excess of the earlier year was not available for the subsequent year was found to be against facts. The Tribunal also adverted to the columns in Para.3 and found that in every year there was an excess of development reserve. The Tribunal therefore held that the withdrawal of this excess would not offend the provisions of S.34 (3) and it was only the excess portion of the reserve which was found unnecessary that had been siphoned off. In such circumstances, it was of the view that nothing had been established to disentitle the assessee to the benefit of development rebate. The Tribunal dismissed the Department's appeal. The Tribunal agreed with the Assistant Commissioner that while the reserves for all these years was only £ 45,222, there was in existence a reserve of £ 5,5,064. The Tribunal was of the view that in every year there was an excess of development reserve and the excess had been syphoned off only in the accounting year which ended on 31-3-1967. It is riot as if the assessee had utilised the excess of one year to compensate the deficiency for any subsequent year. As there was an excess of reserve created in all these years there was no question of such excess being utilised in subsequent years. 6. In view of the clear finding of the Tribunal as above, we think nothing has been made out to show a contravention of S.34(3) which would justify action under S.155(5) of the Act. The view taken by the Tribunal was correct.. We answer the question referred in the affirmative, that is, in favour of the assessee and against the Revenue. There will be no order as to costs.