JUDGMENT

Sen, J.-The appellant is a public limited company. The assessment years involved are 1972-73, 1973-74 and 1974-75. In regard to the above assessment years, in the returns of Income filed by the appellant before the assessing authority, a claim towards allowance of development rebate under Section 33 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was made. The assessing authority allowed the claim as made by the company. Subsequently, the assessing authority noticed from the balance sheet of the appellant company that the company had made a transfer of sums from the development rebate reserve to share capitalisation account by issue of bonus shares. The assessing authority concluded that the issuance of bonus shares amounted to distribution of profits by capitalisation and thus the assessing authority was of the view that the provisions of Section 155(ii)(a) of the Act applied to the instant case, as the development rebate reserve has been utilised for distribution by way of dividend or profits. Accordingly, the assessing authority passed an order under Section 154 of the Act wihdrawing the development rebate claim allowed earlier.

2. The Company went up o